What is more, Mr Carney will be the first governor of the Bank of England not only to have the power to set interest rates but also to directly influence the supply of credit through the newly created Financial Policy Committee.

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Indeed, speculative excesses in asset prices and credit flows might occur more frequently in future, thanks to the combined effects of financial liberalisation and a monetary-policy framework that concentrates on inflation but places no constraint on credit growth.

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Among other things, financial institutions tend to benefit from looser fiscal policy which Credit Suisse says will be in place for some time.

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So, for example, he says that if - as now - there is evidence that banks are creating too little credit for the health of the economy, the Financial Policy Committee should perhaps have an explicit power to limit dividend payments by banks, so that the banks retain more capital to underpin lending.

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And it's important to understand that part of the reason that they are borrowing on their homes, they're borrowing on credit cards, is that the banks and financial institutions have dominated policy in Washington.

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These three sets of policy tools--lending to financial institutions, providing liquidity directly to key credit markets, and buying longer-term securities--have the common feature that each represents a use of the asset side of the Fed's balance sheet, that is, they all involve lending or the purchase of securities.

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The financial crisis has led to such a widening of credit spreads and tightening of credit standards that aggressive monetary policy easing has not been enough to contain the crisis.

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