Imagine how the Irish economy would have performed if the banks hadn’t borrowed all that money to finance property-backed loans. During 2002–2007 a vast sum in the order of twice annual GDP (much of it borrowed from abroad) was channelled by the banking system into property-backed lending. Where did all this money end up?
That was the question recently asked by Colum Kenny in this newspaper, and also addressed to me at the Banking Inquiry. As we take steps to ensure that there is no return to boom-and-bust conditions, it is indeed timely to revisit this question, which has puzzled many. One approach to answering the question seeks to construct a kind of audit trail.