Being an economist often means telling people things they don’t want to hear. Or, at least, it should. That was what I told a group of smart young sixth-form economists I met last week at Cambridge University. It’s a message that needs renewed emphasis, given the early policy musings of Labour’s newly-elected leader.
This column has a long-held aversion to quantitative easing. I accept, in the immediate aftermath of the 2008 Lehman Brothers collapse, that some “extraordinary monetary measures” were justified. The Western banking system, after years of hubristic and sometimes fraudulent behavior in the City, on Wall Street and elsewhere, was close to collapse. Lax regulation by successive governments on both sides of the Atlantic meant deposits of ordinary firms and households were dangerously exposed to potentially explosive investment strategies.