You don’t need to be in Berlin to take a swipe at Gordon Brown’s economic record. Members of the monetary policy committee have started to put the boot in too. Andrew Sentance, one of the MPC’s external members, recently gave a thought provoking speech demolishing the idea of a “bust without a boom”.
While we may not have seen a classic inflationary boom-bust cycle on the 1970s-1990s model, it would equally be wrong to deny that the current bust was preceded by a boom of some sort….We are now appreciating that the earlier years of this decade saw an expansion of various forms of financial market activity which have subsequently proved unsustainable.
His conclusion is that the Brown era is markedly different from other post-war booms because of the remarkable stability in prices. But there was a bubble, he says, and the consequences from it unwinding will be no less severe.
In his piece on the speech, Chris Giles, the FT economics editor, uses Treasury figures to estimate just how unsustainable this bubble was. In the chart below he shows how a change in Treasury’s assumption of “sustainable growth” has flattened out the Brown boom and the Brown bust. How convenient.