Will more quantitative easing really revive the economy? The Bank of England has given a clear signal it is ready to resume buying government bonds, possibly starting next month. The latest minutes from the Monetary Policy Committee show most members now consider it probable a new round of QE will be needed. But the minutes also show the committee's biggest worry is the current closure of bank-funding markets. It's not clear how QE can help with that.

The BOE is right to be worried about bank funding. There has been no senior unsecured bank debt issuance in Europe since May and even the covered bond market has closed again after briefly opening in August. Although the UK banks have already raised much of funds they need for 2011, if they are shut out of senior unsecured funding markets much longer, they may feel pressure to reduce lending. With lending growth to small and medium-sized businesses already exceptionally weak and the total UK credit supply contracting, there is a risk of a renewed credit crunch.