OK, sanity actually returning when it’s not shown all that many signs of having been around in the first place is a bit of a stretch. Nonetheless, there’s a lot to be said for Anatole Kaletsky’s recent column in the Times about the current economic crisis. Like the Bank of England last week, and the US Treasury today, he thinks it’s all been a bit overstated and suggests everyone should calm down a bit.

Long-term readers will be aware that I have a lot of time for Mr. Kaletsky. When everyone was panicking about the UK’s withdrawal from the Exchange Rate Mechanism over a decade ago, it was he who observed that this would offer a chance of lower interest rates and therefore a better standard of living. He was right then and I suspect he’s right now.

As always, however, the difficult stuff is in the detail. He is not, repeat not, saying the easy credit is going to come back. Business loans, like personal loans, will be harder to come by than they were six months ago. There are solid reasons for this. Banks had estimated the value of their assets at least partly on untested items - for example if you had a house and wanted to remortgage, the Bank would probably make you an offer and yet without the house on the market nobody would really be able to establish an actual value. This, on a massive scale, is what’s caused the short-term problem we’re suffering now.

If Kaletsky and two Treasuries including ours are right, that problem is about to go away. With a bit of luck its cause will also go away, and people won’t make rash valuations of assets and borrow against them again, either on an individual or national scale.

Unfortunately I remember saying something similar in 1995..

P. S. Interest rate day tomorrow and I got it completely wrong last time. So I’m going to stick my neck out and say ‘hold’ this month.

anatole kaletsky | Bank of England | borrowing | credit crunch | econom | us treasury