Varley: credit to shrink for up to two years
One of the main contributors to what looks like a severe recession in the UK is a contraction of lending by our banks.
Which is why it's unlikely that a recovery will start until banks grow their lending again.
How long will we have to wait for that?
Well the chief executive of Barclays, John Varley, says in an interview with me for Monday's Panorama (8.30pm on BBC1) that it will take between one and two years for lending to stop shrinking.
He insists that banks are open for business, that loans are available. But he says that a reduction in the overall quantity of debt in the economy is absolutely necessary - although he concedes that the process is extremely painful.
John Varley also says that the banking industry is going through what he calls a public relations crisis, that it must apologise for what went wrong - because banks will not regain the vital trust of customers unless and until they own up to the sins of the past and say sorry.
Here are a few relevant quotes from John Varley.
He says: "I think that we will see the process of reduced borrowing play out over at least the course of the next twelve months maybe, maybe twenty four months. I think it's important to say though that the industry is open for business..."
Mr Varley stresses that credit remains available to businesses and households but that the amount available is "shrinking, it absolutely is, and that is a painful process; it's a process through which the world absolutely has to go and if you asked me 'when will it stop?' I think it will stop when asset prices stabilise.
"As soon as asset prices stabilise, then we will see the financial economy recover. And when will that occur? That will occur some time over the course of the next 18 months."
When he talks about asset prices, he means the price of property, shares and so on.