We had to hurt savers to save the British economy, says BANK OF ENGLAND GOVERNOR MARK CARNEY

Governor Mark Carney of the Bank of England says that Quantitative Easing has helped the British economy recover much faster from the financial crisis than would otherwise have been the case

I started working in the city three decades ago this month. Since then I have spent almost my entire career in and around finance in both the private and public sectors and have witnessed his promise and pitfalls.

I have realized that in order to use the real goal of finance, we must resist three big lies that can spoil it.

The truth is that, if well managed, finance is forever an immense force. Financial institutions, such as banks, should serve us, not the other way around.

They lend us money to buy houses or to start businesses. They provide our savings for the future. They manage our pensions and help protect us against risks.

Governor Mark Carney of the Bank of England says that Quantitative Easing has helped the British economy recover much faster from the financial crisis than would otherwise have been the case

Governor Mark Carney of the Bank of England says that Quantitative Easing has helped the British economy recover much faster from the financial crisis than would otherwise have been the case

Ten years ago, when Lehman Brothers collapsed, and the three lies of finance were uncovered, all of this was at risk. The first lie was the idea that & # 39; this time is different & # 39 ;.

These are the four most expensive words in the English language.

In the years before the crisis, central bankers controlled inflation, the big economic problem of the 1970s and 1980s. This ushered in an era of stable growth called the Great Temperance.

Then smugness began. People thought that economic instability had been eradicated and that high debt levels were no longer a problem. But tree and bust were not abolished. When the storm came, very few were prepared.

The second lie was that the markets are always right.

During the Great Moderation, asleep in a false sense of security, policymakers began to believe the myth that the market is always right.

That led them to believe that the less the authorities interfere with the markets, the better – a philosophy that came to be known as light-touch regulation.

But instead of clean, efficient markets, we ended up with a complex web of dodgy subprime mortgages, opaque shadow banks and risky derivatives.

This fueled a growing bubble that infected many of the world's banks, including ours. When it exploded, everyone suffered.

The third lie is that markets are moral – that they can exist separately from the society they serve.

Real markets fuel prosperity and enable companies to invest, create jobs and grow our economy. However, if left unattended, they may be susceptible to excess and abuse.

Before the crisis, markets became informal and clubby rather than professional and open. People started to come together online instead of competing for merit.

Few were responsible for their actions. So what is the truth?

Over the past decade, the British authorities, including the Bank of England, have acted on the basis of these painful lessons.

Our priority in the wake of the global financial crisis was to strengthen trust and encourage households and businesses to continue issuing.

This meant that the Monetary Policy Committee of the Bank of England had to cut interest rates to record lows. It also meant that the Bank had to start a program called & quant. Quantitative Easing & # 39; to inject more money into the economy.

This may not have been a popular policy among some savers, but the truth is that it helped the British economy recover much faster from the financial crisis than would otherwise have been the case.

Without this action, real wages would have been 8 percent lower, or around £ 2,000 per employee per year, and 1.5 million people would be out of work. In short, although it may be painful for some savers, monetary policy has been very effective.

Flashback: a member of staff from Lehman Brothers transports his goods on 15 September 2008 from the Canary Wharf offices of the American investment bank.

Flashback: a member of staff from Lehman Brothers transports his goods on 15 September 2008 from the Canary Wharf offices of the American investment bank.

Flashback: a member of staff from Lehman Brothers transports his goods on 15 September 2008 from the Canary Wharf offices of the American investment bank.

And since this action generates more than 3 million jobs, the number of people at work has increased at a record level, wages have risen more than 20 percent before inflation was adjusted and real output rose by 18 percent.

All major income groups, from the highest incomes to the lowest, have seen their income and wealth rise, despite the headwinds of the aftermath of the crisis.

The bank's price has already increased from the record low of 0.25 percent to 0.75 percent and there are probably more gradual price rises if the economy continues its current path. In addition to these measures, we have also taken steps to develop the underlying & # 39; structural & # 39; problems in the financial sector.

In order to align the values ​​of the market with those of our society, there are now hard new codes and standards. We have established a new regime that ensures that the people running financial companies are accountable for their actions and those of the employees they oversee.

If there is bad behavior, bankers can now lose their bonuses and their jobs or even risk new criminal sanctions.

Banks are less complex and more focused on you, their savers, borrowers and small business customers. They now lend to more households and businesses and act less with each other.

We have replaced toxic shadow banks – financial institutions that were not regulated – with a financial system that serves our companies much better.

We have made banks more resilient by the safety net that they have to hold against losses more than three times.

And banks now have ten times more assets that are immediately available in an emergency than before.

The era of "heads" that they win, tails that we lose & # 39 ;, banking is over. Banks are now structured in such a way that their shareholders and large private debt investors – and not taxpayers – will bear the costs of future errors.

And we have scared off the major UK High Street banks, so that even if your bank gets into trouble in the city, your local office can continue to provide the service you need.

Despite the enormous progress in the past decade, we can not let complacency take place again. If the experience of the financial crisis policy makers can learn everything, it should be humbleness.

Instead of believing it is different this time, or hoping that everything will work out well in the night, the Bank of England is now thinking about what can go wrong and then prepares our banks for their work if they do.

That is what we have done in recent years in preparation for the Brexit.

Some of you may not agree with some of the things that the bank has said on this subject. But it is our job to prepare ourselves for the worst, not the best.

By identifying the risks and providing solutions, the bank works hard every day to get our financial system in shape for the Brexit, in whatever form.

That is why British households and businesses can rely on our financial system in the next decade and beyond to serve them both in bad times and in good times.

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