Bastard! When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done. — John M. Keynes
Only the second mechanism applies if the cause of inflation cannot be controlled by interest rates. Today the ECB announced that it intends to increase EU unemployment substantially in order to protect the economy. Or something.
To sum up, a cross-check of the outcome of the economic analysis with that of the monetary analysis clearly confirms the assessment of increasing upside risks to price stability over the medium term, in a context of very vigorous money and credit growth and the absence thus far of significant constraints on bank loan supply.
If (as some suggest) banks in France (for example) were only making safe loans in the domestic market, then the lending levels won't change that much. Banks to need to continue "safe lending" to keep their cashflow up.
The problem in the UK is that a large percentage of lending was "unsafe" so it's sudden disappearance amounts to a credit crunch. If you are a safe bet (under the assumptions of say, 10 years ago) you can get money from a British bank right now, with few problems. The issue is that consumers and businesses had both adjusted to a different regime, so few of them qualify as safe bets right now.
