UK monetary policy  Measures to make the system safer, fairer and to operate with more integrity are re-founding a more resilient, open global financial system. This sets the stage for monetary policy to support a supply side recovery. Ben Bernanke once said to Milton Friedman and Anna Schwartz, “You [were] right, we [the Fed] did it [caused the great depression]. But thanks to you, we won’t do it again.” Thanks in  BIS central bankers’ speeches  3  part to Chairman Bernanke’s leadership, central banks have pursued the opposite strategy to the 1930s to great effect. While the human cost since 2008 has been considerable, it is dwarfed by the experience of the Great Depression. Central banks haven’t done it again, but that doesn’t mean they should be satisfied. There remains still considerable, if uncertain, slack in their economies. I say uncertain because obvious measures of slack, such as unemployment, are much lower than we would have expected given the scale of the fall in demand. Supply side performance in advanced economies has been surprisingly poor. Before the crisis, the growth in potential supply was largely predictable (technically a stationary trend). As a consequence, central bankers responded to movements in demand around that trend. The issue now is the extent to which the fall in demand has itself eroded potential supply and whether that could be reversed as economies recover. In the US, the question is whether labour force participation rates will pick up.
Just last November I visited OnForce Solar, an installer of solar heating systems located in the Port Morris section of the South Bronx. There has also been a great deal of retail development over the past decade – most notably, perhaps, the Bronx Terminal Market just south of Yankee Stadium. A little known fact is that, on average, jobs pay more in the Bronx than in any other of the five boroughs, except for Manhattan. And my regional economists assure me that it’s not just the Yankees that bring up the average, although they do make a difference. This, of course, is not to say that all is well in the Bronx. Its poverty rate and unemployment rate are both roughly twice the national average, and higher than in any of the other boroughs. While crime has fallen dramatically over the past two decades, it also remains higher than in the rest of the city. Debt is also burdensome for many Bronx residents. Delinquency rates on household debt are relatively high, suggesting that many people are financially “distressed.” All this makes it especially important to maintain the economic momentum that is improving the quality of life in the Bronx. Community banks have an important role to play in this process. Bank lending can help businesses – especially new and small businesses – expand and grow jobs, and help residents invest in improving their homes, neighborhoods and communities.