Companies are celebrating like in 2007. It's time for the bank to play badly! Business

You want something, so when that happens, it's not what you're hoping for. This is what central bankers must feel as corporate debt soars.

They wanted companies to borrow and grow, but not like that. Last week, this concern was visible in the minutes of the Bank of England's Financial Policy Committee. They show that the committee, which lends money abroad and is chaired by Governor Mark Carney, has compared a rapid growth of loans to indebted companies around the world in the US subprime mortgage market, which triggered the 2008 financial crisis.

For a group of sober, generally reluctant regulators, comparing the boom of corporate borrowing today to the senseless years that precede 2008 is a time of waiting.

The trillions of dollars worth of cheap money generated by Threadneedle Street, the European Central Bank, the US Federal Reserve and the Bank of Japan over the past 10 years have had to find a home. The hope was that private liquidity companies take the money and invest in new machines and processes.

Instead, they seem to have done two other things. The first was to borrow enough to pay back old debts. This is a classic behavior of zombies and leaves the leaders of the company without any investment. If they make profits, it's because workers can accept low wages and poor conditions now that cheap loans reduce their bills.

The second destination of the central bank's money was the property – considered a safe investment when a helping hand deflated on a new machinery seemed a game of chance.

The central bankers must have known that this could happen. They work on the premise that an economic cycle of eight to ten years leads to a recession. During the recession, interest rates went up and companies that borrowed a lot but failed to improve their profits went bankrupt.

The financial crisis was so severe that it attracted good and bad businesses. To avoid a calamity, the bank reduced interest rates and expanded the money supply, which saved the bad and good businesses.

The fact that banks lend to companies that have done little with their previous loans is a cause for concern. Debt accumulates and continues too often to be used to repay old debts. Not once, but on a rolling program of debt financing.

That money has inflated real estate prices is not much better. This also has obvious consequences.

As the committee points out, this is a global trend that is not part of the UK's discourse. This may help British decision makers feel better. Still, it just means that when the crash happens, it will be bloodier.

Is there a cure? The Bank of International Settlements, the Basel-based group of central bankers, said interest rates are expected to rise in developed countries and, more importantly, more should be done for commercial banks to pass on interest rates. effects to customers.

For some time, the big banks have been aiming to keep interest rates low by reducing their margins and making up for the shortfall by lending more.

However, when much of the commercial activity relies on extremely low interest rates, the BRI's remedy is in line with Lord King's warnings to regulators after the fall of Northern Rock – namely when the game is in full swing, she must be ready to remove the punch bowl.

The party is in full swing? Full employment would tell them yes. On the other hand, compensation that remains below 2008 levels on average would indicate that the party has not even started.

In full swing or not, the big banks can not help but act without fear, which allows the regulators to envisage a more direct intervention. Given the potential for another disaster, direct intervention should be an option.

Lies, accursed lies and China's GDP

The regularity with which China's official growth figures are in line with expectations confirms Benjamin Disraeli's claim that there are three types of lies: lies, damned lies, and statistics. No serious observer believes that the world's second-largest economy is growing at 6.5 percent a year or so.

The real story of China is that of a slowing economy even before Donald Trump imposed his protectionist measures.

Its exports were actually robust in the third quarter as US companies anticipated their purchases of Chinese goods in order to avoid paying customs duties. China's problems are mainly internal in nature. He avoided the calamities during the global recession of ten years ago, thanks to a combination of public and private debts. State-owned companies have been kept afloat and cheap credit has fueled a housing boom. The rise in real estate prices has allowed Chinese consumers to use their homes as ATMs, which has boosted the demand for cars and other durable goods.

In recent years, Chinese politicians have tried to do what it was impossible to do in the West: deflate the bubble without causing a massive recession. We talked about slower but better balanced growth. If only.

Balanced growth would mean that production moves away from inefficient state-owned enterprises (state-owned enterprises) to the benefit of private firms. In recent months, Chinese policymakers have done the opposite. Purchases from state-owned enterprises increased while loans to the private sector were limited. Credit restrictions have been eased.

As the impact of Trump's trade war has yet to be fully felt, Beijing will increase the scale of its stimulus package. In the short term, this will lead to a recovery in growth, but will hurt the country's long-term growth and make a recession more likely in the future.

Another Gatwick track should be stopped

Hardly had Gatwick seen a reduced runway project, like a hydra producing two asphalts.

After seeing its expansion plans pushed back by the government in favor of Heathrow, West Sussex Airport has unveiled a master plan to turn its emergency runway into a second fully operational airstrip and preserve the territory beyond its perimeter for a possible third runway. .

This latest proposal has the support of the companies and the mayor of London – presumably, primarily, not to be Heathrow. The competing merits of expanding at rival airports could do the trick, as it is of course the case: the Airports Commission answered this question in two long volumes, over many years of consultation and research. . So why is he asked again?

Gatwick's 15-year plan makes it clear that he could handle many more flights simply by maximizing the performance of his existing single runway. Turbocharging this growth with another strip of tar raises several questions.

In practical terms, there is always a hint of background. The accepted wisdom has long been that the dimensions of the airport could not accommodate two tracks; the widening of the emergency track might not convince the safety regulators. In addition, the commission made it clear that only one additional runway in the southeast would make economic sense – and gave Britain a reasonable chance of achieving its climate change goals.

The UN warning this month of the expected devastation beyond 1.5 ° C rise in temperature could have given pause to expansionists at the airport. More airport capacity is available and more are coming at a time when economic nervousness and Brexit could dampen demand for air travel.

Few people need or benefit from these additional leads, with the exception of Gatwick's largest shareholder, GIP, which aims to cash in on its 42% stake and needs to sell more and more vision. planes over the southern skies.