The Nice – non-inflationary, consistently expansionary – decade has gone. The next decade is going to be nasty. It is time to start learning lessons. “Niceness” proved a mistake.
The UK economy has moved with brutal speed from what Andrew Haldane, the Bank of England’s new executive director for financial stability, in a brilliant paper*, calls “the golden decade” of steady growth and low volatility to its opposite. Stability has proved the economy’s nemesis, as Hyman Minsky predicted.
Today, the UK is confronting a painful legacy: the collapse of the housing market and the financial sector; high levels of household debt; evaporation of government revenue; huge fiscal deficits; and assumption by the government of responsibility for a banking system whose aggregate balance sheets are close to five times gross domestic product. This is scary.
The remainder of the article can be read here. Debate from our panel of economists appears below.
