The Deputy Governor comments on the broad financial changes which have accompanied the shocks to the economy in the 1970s. Growing sectoral imbalances have increased the need for intermediation: personal savings have risen, the public sector has gone into large deficit, and companies have been squeezed by slow growth and rising costs.
Mr McMahon comments on the form savings took, the role of the institutions and banks and government finance-and traces the effect of inflation and increased uncertainty, interacting at times with the tax system. Monetary control may have become more difficult: 'borrowing from banks may have become less responsive to ... interest rates and ... to depend more on the relatively slow adjustment of the industrial sector's deficit' - 'it has proved all the more necessary ... to sell large amounts of debt' to achieve monetary targets.
The financial scene in the 1970s - Lecture by the Deputy Governor