Demand or supply?
Is credit growth negative because people don't want to borrow or because banks don't want to lend? The monetary hawks and sado-masochistic austerity lovers emphasis demand implosion.
Everyone's paying off their debts. Nobody wants to borrow. Those with cash are worried about the future. Banks can't lend to companies that don't want their money.
On the other side of the coin are beardy Americans who in between saying the printing presses should crank up again and fiscal austerity belts should loosen, are clear that banks should be a little less tight and stop holding out on our growing SMEs.
While I'm sure there's subtlety to both views that their respective acolytes will flourish at the hint of a challenge, my own view is a bit more mixed than these sometimes starkly expressed poles.Both demand and supply are holding back credit growth.
Adam Posen kind of said this in his speech last week – but he thinks supply issues dominate – in particular those naughty banks and the lack of competition and capital in their sector.
I think it's demand concerns that dominate. With near unprecedented turbulence in global markets that's not surprising and neither can you blame companies for being nervous about committing capital to investment. Too many manufacturers we talk to say that though things are going okay for them now, the constant rumble of doom in the media makes them shy away from investing.
But just because demand is the main factor doesn't mean supply side issues aren't important too. Why is it that small and medium companies are the most likely to show a divergence between their investment intentions and their actual investment behaviour?
These are the guys most reliant on the banking sector to provide their external finance.
Bank of England statistics (and EEF's own survey) show that for small firms at least credit continues to get dearer.
And as the bank-funded SME Finance Monitor has shown, 15% of SMEs don't even get as far as receiving dearer credit - fearful of being rejected by the bank - or worse, having their existing arrangements made more expensive.
For the banks, smaller firms are the most likely to be discriminated against, given the costs involved in scrutinising them, their lack of track record if they're new, and the lack of pressure banks feel from competitors to compete for business.
How you see the issue of access to finance has important implications for possible policy responses. If credit growth is solely a demand problem, then it's very easy – particularly if you favour fiscal austerity – to say that nothing can be done.
If you see tight supply as having a role, even if you think addressing it will all our problems, you may still see a possible improvement via policy (or market) action to improve the flow of finance.
People like Posen and in the House of Lords, Lord Skidelsky, see a role for state-sponsored institutions in the banking sector. Skildelsky is conducting a round table on this matter in November.
I myself might not stretch to this – for a start I don't think a new state-sponsored bank could be made very quickly without perhaps using the government's existing stocks in RBS - which would be disastrous for the share value. But the same concern with the supply side of access to finance is why I've been banging on about the need to move further and faster on enhancing market competition in the UK banking sector.