Danny Blanchflower on the Recession

Been to a really interesting talk last night by Prof David (Danny) Blanchflower. He's someone I hadn't heard of until recently but is a member of the Bank of England's Monetary Policy Committee and of those responsible for interest rate setting in the UK.

Apart from the general brilliance of the talk, what was remarkable was quite how devastating his critique was of UK Financial Regulation. He made a strong argument about how setting interest rates by reference to inflation alone (CPI in particular) contributed to the current economic situation. He also made it clear that there were early warning signs about the credit crunch as long ago as early 2007, and very large toxic warning signs clear by mid 2007. What is clear is that UK financial institutions (banks in particular) failed to accurately account for risk - and we are all now paying the price. But in my view the real villains, identified last night only implicitly, were Gordon Brown and Alistair Darling - those who could have acted, who knew what the data was saying, but did nothing.

I fear we are all going to pay a very heavy price for their lack of action.

Update

There's more coverage on the Blanchflower criticism on the Newsnight blog.