Commercial decisions will still be made on who to lend to and at what cost to the lender – but public ownership will get around the one big obstacle, which is that the people running banks are looking to provide returns to the owners and so make decisions on lending in a different way. Instead of being cautious about lending because they are mindful that their job is to give a return to investors, they will be more eager to lend, but nonetheless mindful of risks, etc. We can see the government has reversed its previous policy with Northern Rock.

With public ownership it’s not about the sectional interest of shareholders (or even, the government as shareholder) but about the interest of the whole of our economy in the long term – ensuring that productive enterprises get the financing they need.

The big problem with all of this will be the EU’s rules on these matters. Sweden’s banking crisis and it’s recovery happened prior to the country becoming a member of the European Union. The political right likes to paint the EU as some kind of warmed-up Soviet Union, but in fact EU institutions would probably oppose nationalisation of the private banking sector on several grounds (competition rules, the rights of shareholders, etc.).

Now, it’s the kind of measure that might need EU approval, and might take a damaging length of time (look at the govt assistance to our car manufacturers – it was held up while the European Commission vetted it). But the government will have to be tough and say it will take the consequences from the Commission.

As to the future ownership in the banking sector, I think we would be wise to learn the lessons of this crisis: the shareholder-as-owner has proven dangerous.

Which financial institutions have been responsible and have not needed public money to bail them out? The building societies, owned by their customers: no one expects from building societies anything other than boring banking – no financial wizardry. Indeed, many of the failed institutions were once owned by their customers – Bradford and Bingley, Halifax, Northern Rock, etc.

As a customer and member of a building society, I don’t ask much more than a good service, either as a lender or saver; I certainly don’t demand of the people running it that they come up with more ways of making money. Now it might be argued that this kind of high-street banking doesn’t apply to the financing of bigger businesses – but my question would be, why not?

Some of this is to do with commercial structures, some to do with simple physical infrastructure. If a steel plant shuts down for 9-12 months, even if coal and iron-ore will be easy to source when they decide to get started again I’m willing to bet that the railway links will have fallen into a mild state of disrepair.

Everything can be rebuilt eventually, but it doesn’t necessarily mean the patterns of the downturn and the upturn are symmetrical.

I think deflation can be good or bad. Deflation can be caused by technological progress (railway lowering transport costs in the nineteenth century) or by a fundamental chnage (China’s entry into the global entry, pushing down costs of manufactured goods). In these cases, then yes deflation is good – it lowers costs.

However defkation can also be destructive, deflation caused by a fundamental lack of demand is likely to make demand even weaker. That coupled with high debt levels can be dangerous.

I would argue that in the early noughties Central Banks mistook ‘good’ deflation (arising from China) for ‘bad’ deflation and cut rates too far. But I also argue that what we face now is ‘bad’ deflation.

The best plan is to fund as much in tax cuits as we can and fund it with real reform of the wasteful PS. AS this is financed with future tax rises on tax payer flinging it at Labour`s benefit vote will not be politically acceptable to those who actually make the beans

Anyway having carped probably quiet ignorantly that was a great post and this looks like being an excellent site .