I have a lot of time for Mervyn King’s comments. Here’s one from today that I think is worth a look. It is from his speech to the British Bankers’ Association on “Banking and the Bank of England”.

“It is often said that the role of a central bank is to take the punch bowl away just as the party is getting going. That approach has served us well in monetary policy. But all those efforts will come to naught if the opposite applies to the financial sector. If banks feel they must keep on dancing while the music is playing and that at the end of the party the central bank will make sure everyone gets home safely, then over time the parties will become wilder and wilder.

“That might not matter were the consequences limited to the party-goers. But they are not. When the party ends, some innocent bystanders may lose their homes altogether.”