The Independent: Regime change happens in economies, too - and it's human beings who are to blame - by Stephen King

The Independent: Regime change happens in economies, too - and it's human beings who are to blame by Stephen King

In recent years, for example, unusually high levels of corporate saving both in the UK and the US (see charts) have led to excessive consumer borrowing, encouraged by low interest rates and rapid house price gains. Without that consumer borrowing, inflation might have been too low.

This approach leads to inconsistencies that simply cannot be sustained. Consumers borrow not only because interest rates are low but also because the anticipated gains on their main asset - their house - are high. If either of these changes, the willingness to borrow may be sharply curtailed. In the process, the economy as a whole simply runs out of puff. And, by doing so, once again inflation is in danger of being too low rather than too high.