The comparison of the pre-Covid decade outside London with the decade that preceded it, is I think a helpful illustration of the impact, when supply elasticity is low, on inter and perhaps intra generational equity that can result from a highly active market in which prices consistently grow faster than incomes. As I highlighted at the outset of this speech, over the past year the UK housing market has returned to prefinancial crisis levels of activity and rates of price growth. Public and banking sector support has played a huge part in this. Furlough schemes and interest payment holidays have limited distressed sales through the Covid crisis, which would otherwise have pushed down on house prices. In addition, a combination of pent up demand from the initial lockdown in which the UK housing market was closed and the substantial tax incentive provided by the stamp duty holiday - which was announced in July 13  All speeches are available online at www.bankofengland.co.uk/news/speeches and @BoE_PressOffice  13  and which will be tapered out over the course of this year – has fuelled the strength in demand for housing. After an initial tightening, credit conditions have dropped back broadly to pre-Covid levels. One would expect the market to cool down when public support to the economy in general and the housing market in particular is withdrawn over the course of the year, as is currently planned.
Consider this graph:  Over the past six years, the monetary base has increased 340 percent, 10 times the rate at which the economy would have expanded in nominal terms had we not suffered the recent recession. One is hard pressed to argue that there is much efficacy derived from additional expansion of the Fed’s balance sheet. This is why I’ve been such a strong proponent of dialing back our large-scale asset purchases. It is my firm belief that the fault in our economy lies not in monetary policy but in a feckless federal government that simply cannot get its fiscal and regulatory policy geared so as to encourage business to take the copious amount of money we at the Fed have created and put it to work creating jobs and growing our economy. Fiscal policy is not only “not an ally of U.S. growth,” it is its enemy. If the fiscal and regulatory authorities that you elect and put into office to craft taxes, spending and regulations do not focus their efforts on providing incentives for businesses to expand job-creating capital investment rather than bicker with each other for partisan purposes, our economy will continue to fall short and the middleincome worker will continue being victimized, no matter how much money the Fed prints. I don’t want to ruin your evening after such a pleasant dinner.