speri.comment: the political economy blog

What if the national economy is like a household budget?

An inexpert population frequently internalises misleading economic ideas: experts should consider engaging on these terms rather than always trying to get the economics ‘right’

Dr Matthew L. Bishop, Associate Fellow, SPERI & Senior Lecturer in International Politics, University of Sheffield

Matthew BishopIn 2012/13, there were 571,334 Year 11 students in UK state schools. Just under half went on to AS Levels the following year, of which only 23,049 took economics, or 8.9% of the total. We can hazard a guess that far less than 8.9% of the general public – say, 2 or 3 in every 100 adults? – have any formal training whatsoever in even the most basic economic contentions.

It takes accumulation of expertise to grasp complex, technical ideas, and our ability to do so evolves as we become more proficient. I was fortunate to study economics at A-level, and learned about a whole range of concepts – GDP, inflation, supply-side, opportunity cost, exchange rates, rent-seeking, monetary policy, comparative advantage etc. – that many SPERI Comment readers take for granted.  Yet we are a minority: to the vast majority these seemingly straightforward notions are impossibly esoteric.

This is why what Liam Stanley calls ‘narratives of austerity’ are so powerful, even though we – the dreaded experts – know they are nonsense. We know there is a consensus among economists that austerity doesn’t work. We know that slashing spending in a downturn to ‘manage the household budget’ will only undermine growth and make that budget trickier to balance as debt grows.  We know the suggestion that we’re ‘reaping what we’ve sowed’ runs counter to economic logic. As Polly Toynbee is fond of saying, of course you don’t rescue an economy in a slump by applying leeches!

But this is the problem: we only know these things because we study the economy.  To the wider population, our ‘expert’ interventions don’t resonate.  When we demand increased borrowing now to cut debt later, we are arguing against all intuition.  ‘No thanks’, people think: ‘I’ll vote for the person I trust to cut spending and debt’.

George Osborne won the battle of ideas, and gained an enduring reputation for careful and austere stewardship of government money, despite being the most fiscally incontinent Chancellor in modern British history. But, again, we know this; we’re the experts.  Yet Osborne defeated us, and a left that might have defeated him, by riding the wave of the simple, intuitive, yet utterly misleading narrative.

So, what is to be done?

The problem, as Jonathan Hopkin and Ben Rosamond have suggested (here and here), is that you cannot fight ‘political bullshit’ with facts: ‘Opponents of austerity need to think more about the theatre of the public sphere, rather than trying to reason the status quo into submission’, they argue. ‘Perhaps the only hope is to fight bullshit with bullshit’.  They are absolutely right, but I would add two nuances.

First, you cannot fight bullshit that has been widely internalised as everyday common sense with expert facts.  The battle is over at that point: you need to find and fight a different one in order to progress in the war.

Second, you cannot just tell people they are wrong. We are all simultaneously intelligent, well-intentioned, and completely unaware of the limits of our own knowledge.  If an expert haughtily says you’re wrong, citing a confusing counter-intuitive idea to prove it, it’s likely you’ll remain unpersuaded and even more determined to seek refuge in the simple explanation that makes sense.  This is especially so today, when, as Simon Wren-Lewis notes, expert advice is less trusted than perhaps ever before.

There was a revealing exchange last year on Question Time, in a discussion about debt (video here). ‘Economics is really simple’, declared a man in the audience.  ‘I’ve got £10 in my pocket. If I buy three pints of beer in Cambridge then I’m probably borrowing money. If I keep doing that, I’m gonna run out of money and I’m gonna go bust. It’s not difficult guys!’

Yanis Varoufakis was on the panel, and his response was characteristically combative: he pointed out why the man was clearly wrong, why his personal budget was not a good model for the country’s economy, and why a ‘savings spree’ would ultimately lead to a decline in national income and increased debt, rather than the opposite. He also appeared very satisfied with himself afterwards, and was subsequently cheered by many commentators, such as Chris Dillow, who welcomed a ‘rare’ intervention in a media that tends ‘to pander to [economic] misconceptions rather than correct them’. Dillow lamented the persistent public belief in fallacious metaphors, ‘the most notorious being that governments should manage the public finances as if it were a household’, and delighted in the dispatching of ‘the silly BBC Question Time audience member who was so ably corrected by Yanis Varoufakis’.

Yet at the end of his schooling – if you watch closely – it is obvious the audience member remained unconvinced. It doesn’t matter that Varoufakis was right: the common-sense – ‘it’s not difficult guys!’ – is too deeply embedded; the explanation too convoluted; and all he will have heard, like millions of viewers, is some complex jargon flying high above his head.  Add in a broader mindset of professional disparagement – he is denigrated and dismissed as ‘silly’ – and is it any wonder people detest experts?

A more humble – and altogether more imaginative – approach would have been to recognise the limits of everyday understanding of economics, and treat the man as a worthy interlocutor in a way that values his opinion and innate sense of propriety.

In this instance, Varoufakis could have started by recognising that, for the tens of millions of Britons not trained in macroeconomics, it’s an obvious truism that the national economy must be like a household budget.

I’ve always felt that this is actually a potentially useful metaphor if harnessed thoughtfully.  People’s instincts aren’t misguided: any good Keynesian recognises that budgets should be balanced over the long-term.  The problem is when ‘national debt’ is reduced to ‘credit card’.  People, like countries, carry lots of different kinds of debts, of different sizes, with different maturities, for different reasons.  This makes sense to them, so why not go with the grain of their understanding?

Varoufakis could have said that, yes, the man is right: if he borrowed to finance his drinking, of course that would be problematic. But by the same token, if he or his family never took on any debt then that could diminish their overall quality of life too.  Few of us have ready cash to buy a house, so we borrow many multiples of our income to do so – enjoying the security that comes with asset ownership – and this is far more than any country borrows, relative to its income, for anything.  We might finance a car to drive to a better-paying job.  Or our children might take on student loans, hoping they will eventually reap monetary rewards.  Although we have to ‘live within our means’ in the long term, in the short term we – people and countries alike – cannot afford to constrain our borrowing when it comes to building assets that take decades to generate wealth.

Such an approach would not only have been conciliatory, comprehensible and convincing, but, crucially, it would have opened up the possibility that a credulous public belief in austerity could be questioned on its own terms.  This is surely a better strategy for engaging inexpert people than confusing, contradicting and even humiliating them by, for example, cleverly and smugly invoking the paradox of thrift.

If physicists laughed at everyone who attempted to comprehend what is happening at CERN, or linguists mocked every grammatical error made by friends practising their holiday Spanish, people would soon give up trying to participate out of exhaustion. The same is true of professional economists: what matters is not getting the economics ‘right’, but rather speaking to people in a language that respects the limits of their knowledge, in ways that actually lead to a meaningful conversation.  Only by choosing our battles more carefully can we hope to win the broader war of economic ideas, ‘bullshit’ or otherwise.

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Categories: SPERI Comment | Tags: , , , , , | 16 comments

Articles and comments posted on this blog reflect the views of the author(s) and not the position of SPERI or the University of Sheffield.

Comments (16)

  1. Like George Osborne, I did not formally study economics, but gave myself an informal education by reading, watching lectures on YouTube, and participating in online discussions. It was clear to me that the “household budget” notion was bullshit without A level economics. But as you say, one cannot fight bullshit with facts – a lesson I wish the political left in this country would learn.

    The reason is that we make decisions based on emotion and then look for rationalisations. Facts don’t win arguments, emotion does. Almost every ad we see these days is about how we should feel about the product, not about why the product is superior to similar products. The more commodified the product, the more emotion in the ad.

    Economic and political opposition could have made more of the bullshit. For example a question I asked in my circles many times was, “If the economy is a household budget, why are we selling off all of our income generating assets?” For a household this makes no sense at all. Unless, of course, the household we are modelling ourselves on is some great country manor that is being sold to the National Trust, because we no longer have an income from our estates in the colonies. Maybe that’s what George had in mind? But can foreign multinationals really be compared to the National Trust? I think not.

    Or, “If the economy is a household budget…

    … why are we inviting everyone in Europe to come and stay in our house?” It’s already quite crowded here and getting more income isn’t necessarily the only consideration. Plus, if we were not selling off assets we wouldn’t need more income…

    … and the government are our parents, what is the advantage of shrinking our parents?” Especially from a traditional conservative point of view, shrinking parents is a bad idea. Parents provide the stability and discipline a conservative family needs. Osborne was keen to get rid of mum, and just have dad. Mum had to go to the private sector, i.e. she went on the game. And we taxed her!

    … and the government are our parents, and we’re shrinking our parents, and dad is terrible at managing the finances, why should we hand control to the neighbours’ kids?” Again this contradicts the fundamental morality at the heart of conservative politics. Parents are the reliable moral centre of the family and manage the finances on behalf of the family. If we don’t trust mum and dad to manage the finances and we outsource that, what does it say about the state of the family?

    And so on. If you run with the metaphor then it very quickly becomes silly. If one does it with a conservative mindset in view, then it obviously contradicts the values of most conservatives. They want strong parents, especially dad. Osborne wanted the opposite.

    It was never that hard to call bullshit on Osborne’s narrative. One doesn’t need a university degree in economics to see it. I chalk the failure up to the opposition having studied economics; the same economics, often in the same schools, as most of the mainstream.

    The economy is not like a household. It’s like a business. And not borrowing to invest in a business when it needs to grow and interest rates are effectively zero is stupid. Especially when the private sector is so saturated with debt that even at historically low interest, few can afford to take on yet more debt. No rescue of Britain PLC is coming from the private sector any time soon. Or any major economy. We’re all massively over indebted in the private sector. This part is not rocket science.

    Private debt is like a carpark that is full – cars are loans. We can squeeze another car in, but only if one leaves. Banks are still making some loans as new players go into business, or as old players go out of business. But the carpark is full and has been since 2007.

    “The era of ratcheting up debt to fuel growth is over.”
    “Debt fuelled growth drove the UK economy into a ditch.”
    “Private debt is mining future wealth of the 99% to enrich the 1%. Let’s stop while we have a future.”
    “Neither a lender, nor a borrower be!”

    And so on.

    The deepest irony was that Osborne repeatedly said that state qua household ought not to be in debt. But his major policy initiatives encouraged actual households to go further into debt, by making borrowing easier and inflating house prices (another contradiction not addressed). His legacy is that household debt rose and reached 150% of household income. How did the opposition not make a meal of this?

    The problem seems to be that most of the economists, journalists, and politicians in the country *did* study economics at school and university. So they have internalised the Neoclassical consensus as the whole of the subject of economics. For them economics is just the Neoclassical consensus. They consider Keynes a failure, markets can be free, debt cancels out, demand curves slope downwards, and that banks lend reserves. And all the other bullshit that comes from the standard texts. They studied economics for three years as an undergraduate and never spotted that there is not a single real world example in any of their textbooks. Examples have to be tailored to fit the theory, because the theories don’t work in the real world. It’s one of the greatest con-jobs in history.

    One of the attractions to this blog is that seems not to be part of that consensus, but explores other ideas. Now, if only we can get the mainstream to *think*!!

    • Thankyou, truly, for a really thoughtful and thought-provoking response. I agree with much of what you say here, so cannot really due your comment justice in my own response. Two issues to pick up on though: your point about it never being “that hard to call bullshit on Osborne’s narrative” because “One doesn’t need a university degree in economics to see it”. I would suggest that you’ve rather proven my point: you can see this easily because you are also evidently an expert. I do not equate expertise to having a university degree or formal education; I equate expertise with meaningful understanding, and you evidently have a far greater level of expertise than the vast majority of the British public. As a consequence, tens of millions of people remain either confused about austerity – again, not helped by a rabid media that willfully distorts reality, or a BBC that reports contradictory views on it as if they have equal merit as a form of faux and unthinking “impartiality” – or they are unable (even unwilling) to “call bullshit” on something that is clearly bullshit to those of us who do have an elevated level of understanding. It’s impossible to test the counter-factual, but I wonder if you would feel the same way had you not spent all that time educating yourself on economics and chosen, say, bread-making instead. I realise this is trite example, but chances are you’d be far more concerned right now about Great British Bakeoff – like literally tens of millions of Britons – and the economic news, including about austerity would be passing you by, just as the news about Bakeoff generally passes me by. This is the reality we are faced with when trying to communicate economic ideas. The second point is really about the Conservatives: I often, often wonder where the real conservatives – i.e. those who believe in genuinely conserving institutions like the BBC or NHS, rather than seeing them asset-stripped by rent-seeking corporate elites, or reducing poverty and extending opportunity to the nation as a whole – have gone. I once wrote a two-part blog here about this – “A Centrist Political Economy for Britain” – and much of what I said in that still stands in my view. Thanks again for your comment: much appreciated.

  2. Your claim that there is a “consensus among economists” against austerity is demonstrably false. As an economist myself, my results support those of Alesina that fiscal consolidations can be expansionary in the long-run.

    • I’m afraid we’ll just have to disagree on this. A consensus among economists of course does not mean that every single economist on the planet thinks the same way (indeed, how could they?) But I would argue that a far greater number – particularly those working in academia and outside of finance or right-wing think-tanks – see austerity as more problematic than those who do not. If you read the blog post by Simon Wren-Lewis that I linked to when making this claim, his account of this is more eloquent than mine and I would say pretty convincing.

  3. I disagree with the spirit of this blog post and here is way: It is more important that people know the truth, than that the left wins its battle of ideas. And this should even be so on a classical left picture, after all a major aim of a classical left agenda was that the people direct their own future. This, however, requires that the people know the basic facts of economics. It is just not possible to reach this left aim, if one comforts people with misleading metaphors. They need to know their economics to direct their own future – or so I contend.
    Maybe other short term goals, like reducing inequality are given primacy in this post, but then I wonder why? Is there a justification for that?

    Of course none of that is to say that one should laugh at people, who as of yet lack knowledge, or that a metaphor like that of the household can never be useful. All I suggest is that bringing knowledge to people is more important than the left winning its battle of ideas – or rather bullshit.

    • I think I would take issue with the premise of your comment. The idea that there is either “truth” or “basic facts of economics” is highly problematic. The very subject matter of economics is contested, although you might not believe it from mainstream accounts (and this is what “political” economists and institutions like SPERI exist to consider and critique). I was careful in the blog to use the term “contentions” rather than facts, since, although there exist consensuses and established, foundational ideas, their dynamics and significance are open to interpretation, challenge, argument, and reinterpretation. Perceptions of reality are often – if not always – as important as “reality” itself (were such a thing to exist).

      Consequently I do not view the relationship between either seeking “truth” or communicating ideas in a way that might be different to accepted expert opinion as zero-sum. I think you can be economical with the “truth” (which is ultimately contested in any case) in a way that still does justice to economic ideas while also encouraging people to think and helping them educate themselves in a positive-sum way. Indeed, we do this all the time in school and university: one example that I cut from the first draft of the blog was the way in which, if you study GCSE French, you actually learn a number of incorrect grammatical rules (because they’re easier to grasp before you develop the appropriate skills to build on them) that you then have to unlearn at A-Level and beyond.

      Incidentally, I didn’t actually say that it was more important for the left to win the battle of ideas than for people to understand “the truth” about economics. I merely implied that, before 2015, neither of these things had happened when both could have done (or at least the former with a bit of the latter) with different approaches. My real concern is that we have a conversation that everyday people can grasp. If this means sometimes getting things “wrong”, so be it. But it doesn’t have to: sometimes it just means thinking about things from a different angle that is easier for people to understand. Academics and other experts, in my view, have a duty to do this. Nuance and “truth” will always be lost when we boil things down – indeed, even for academic audiences, at times, we omit details and complex ideas – so I don’t view this as a cardinal sin if it means that the proverbial man on the street might make some intellectual connections that help him to get a better handle on what’s going on. I take the view that you can “bring knowledge to people” and package it in a simplified way that respects the level of their expertise.

  4. The problem with the ‘state as household’ analogy goes deeper than your argument that sometimes it’s good for households to take on debt. I presume you’re well aware of the fallacy of composition but it seems you think that’s too ‘expert’ to expect ordinary people to understand. If economists and informed people can’t get across the relatively straightforward point that one person’s debt is another person’s surplus – and more importantly vice versa – then we probably do have to fall back on the ‘trust me I’m an economist’ theme with all it’s obvious weaknesses.

    For what it’s worth I occasionally had success with friends/family who propounded the household model by countering with variations on the babysitting circle – if there is a limited number of tokens for circle members to pay each other with, and every member of the circle tries to make sure that he (or she) earns a surplus of tokens, then the circle will eventually collapse because no one is willing to spend the tokens they have. This can be extended to the economy by explaining that if government runs a surplus, then someone else must be running up a debt: and if your job is uncertain then it probably won’t be you.

    But simple platitudes of the kind ‘sometimes borrowing is worthwhile’ does not get the message across, in my view.

    • I was actually going to use the fallacy of composition argument in the paper at first, but changed my mind. Please let me be clear: I’m not saying that complicated or counter-intuitive economic ideas are “too ‘expert’ to expect ordinary people to understand” (and I didn’t use the word “ordinary” anywhere in the blog). Just read the very first comment from Jayarava, who notes how he (or she – I’m making assumptions based on the picture!) has self-educated to a very high level of economic comprehension. My point is that experts have to consider the relative level of expertise accumulated by an inexpert interlocutor when engaging with them. My father-in-law has a PhD in physics: he’s generally pretty careful to explain things to me in a way that respects the fact that I will never understand the things that he understands in the same way. Is that a crime? I don’t think so: he’ll omit plenty of details that would be impossible for me to grasp, and probably even use misguided metaphors to help me grasp something. And it’s that something that matters, because it means that I can understand more than I do currently. So, by all means explain the paradox of thrift or the fallacy of composition to people if they might get it and it might improve public understanding. My argument is not that this shouldn’t happen. It is rather that, in some situations, there might be better strategies available for engaging with people in a language that they do understand if you wish to persuade them to think differently. The context is crucial.

  5. Agree and disagree. If we simply explain that families borrow to invest, in a car for work say, people will sensibly reason that a person with considerable debt who needs a car to get to work would do well to seek the cheapest suitable car available and should certainly buy a cheaper car than they might have done if they did not have debts. And that’s all the justification that austerity needs. Since debt is high we should spend less than we did when it was low. Unfortunately, only the full explanation will really do. Given the few seconds he had to get his point in I thought Varoufakis did remarkably well. It’s obviously a line he’s used a thousand times in first year Econ letures. It’s true that the audience member shouldn’t have been called ‘silly’. He just hadn’t studied Econ. I don’t like to think about the number of subjects about which I am fully as ignorant as he was about economics.

    • Initially I thought Varoufakis did well when I first watched it last year. But I knew there was something I didn’t like – he appeared just a bit too smug for my liking – and it nagged away at me. He reminded me a little of “competitive dad” on the Fast Show, who scored lots of goals against his kids, but never really taught them to play football. This is why, in the blog, I try to draw the distinction between being “right” (which he was) and persuading or convincing people to think differently (which I don’t think he did). The thing that concerns me is the latter: i.e. how do we encourage inexpert people to challenge the safe, comfortable, but deeply political nonsense that they’re fed by a rabid press each day? Telling them they’re wrong doesn’t work in my view. You can come up with any number of accepted evidence on economic issues to prove to them why they’re wrong, but that doesn’t mean they will be persuaded.

      As Chris Dillow suggested in a rejoinder to my blog (http://stumblingandmumbling.typepad.com/stumbling_and_mumbling/2016/09/persuasion-in-a-post-truth-world.html) this only works if the person is prepared to meet us half way and actually educate themselves. But “the one who is loudly spouting nonsense… deserves our derision and contempt”. Perhaps this is right, and it definitely is in his example of Douglas Carswell, who, as a politician, should know better. But what about friends and family, many of whom might not have had the best education, or the time to educate themselves as the juggle the challenges of everyday life? Do we just browbeat them over the dinner table? These are the people I care about, and, crucially, the people that matter when it comes to election time. I’m interested in finding common ground: I think people are trying to engage, so let’s help them.

      I’m not suggesting we should propound falsehoods. What I am suggesting is that there are many ways around an economic question; why not try to find an approach that meets in the middle and allows for a meaningful conversation? Again, as I said in response to one of the other comments: this is what we do in university seminars sometimes. There’s a chasm between the knowledge of an academic who spends all day reading peer-reviewed literature and the first-year student. We can bludgeon them with our expertise every time they say something questionable, and simply turn them off. Or we can put some of that to one side, come down a few levels to a lower rung on the accumulated knowledge ladder, ask some different questions, and find ways to help them understand a little more than they did before and question their own assumptions and ideas. It doesn’t matter to me that they might not have understood everything, or have reached the ultimate level of expertise. I don’t see why we can’t take the same principles into public dialogue. Indeed, in a time-compressed situation where it is impossible to give “the full explanation” as you put it, we really don’t have any other choice if we wish to connect.

  6. “any good Keynesian recognises that budgets should be balanced over the long-term”

    Which is another way of saying every good Keynesian is as wrong as that audience member in Question Time.

    Almost every country involved in WWII racked up massive government debts during the war. Certainly Australia’s, at that time, was the highest as a proportion of GDP that it’s ever been. Did we pay it off by running constant surpluses after the war (balancing the budget over the long term)? No, we mostly ran deficits, the debt burden just diminished through economic growth and inflation. We never really paid it off, not in any meaningful sense.

    The same was true in many other countries. Australian government debt is pretty low now but we’ve run many more deficits than surpluses since those massive debts from WWII. And that’s without monetising debt during economic downturns which is another option open to sovereign governments. The idea that national governments should balance their budgets over the long-term is as flawed as the idea that national government budgets are like household budgets.

    • Well, Keynes also said “in the long-run we’re all dead”. Although there is great debate about what he actually meant, one interpretation that I have always taken from it is the importance, simply, to distinguish between the long and short run, something that doesn’t often happen. I agree with you, of course, that it’s highly irresponsible for governments to run surpluses for any great length of time, though in a short blog post it didn’t really make sense for me to get into this as it was not that relevant to my argument (and it’s another counter-intuitive idea that would have clouded what I was trying to say). My point was really just to suggest that helping people distinguish between short-term investment and long-term debt might help those that do not grasp economics understand things a little better.

      The blog was shared a bit on Reddit, and one of the comments there was that this was “the key takeaway for ‘down the pub’ arguments. If someone talks about ‘the nation’s credit card’ ask they if they bought their house with cash”. So, of course I realise – and agree – that most governments have generally inflated away and grown out of debt rather than paying it down with austerity (just look at France). I’m not ignoring that; I’m simply saying that that argument might not gain as much traction in a given context, and it hasn’t done in modern Britain where tens of millions of people neither understand nor believe it. Which brings me back to my broader point: what matters more, being “right” and losing the war, or choosing a small battle more carefully, and winning it?

      Moreover, it also all depends which country you’re talking about when suggesting that balancing budgets is bad policy. Arguably – and this isn’t a popular argument for many of the reasons discussed in the blog, but may become clearer in decades to come when economic historians have a bigger picture to assess – part of the reason the UK economy has been fairly resilient through the crisis could be because Brown ran a series of surpluses in the mid-2000s and debt going into the crisis was pretty low as a percentage of GDP. I don’t know how you explain that to people who don’t have a good grasp of economics, but ways need to be found because Labour has manifestly lost an argument when the facts overwhelmingly support the party’s case for competent economic management (certainly compared to the Tory governments that preceded and succeeded them, that have never run a surplus, and delivered, what, five or six recessions?)

  7. I think it is worth pointing out that a country with its own central bank and own currency can always borrow more of that currency. So then government spending becomes more an issue of administration rather than one of finance. If the government mis-spends, then the resulting waste will devalue the currency but spending that improves productivity won’t. Isn’t all of that also “common sense”?

    • I’m not entirely sure what the point is here re: common sense. It does seem to be accepted that a country with its own central bank can print and borrow as much money as it likes, but I’m not convinced about this myself, for two reasons. First, the argument is distilled from the experiences of Western countries, which have managed to ride expansion of QE with some degree of devaluation. This doesn’t hold true, in my view, for others: just ask Argentina. It obviously does apply to the US, but there are unique circumstances at play there (hegemonic power, reserve currency etc.). Second, it implicitly assumes that something that has happened will endure forever, but as with economic crises in general, past experience is not always a good guide to the future. So, perhaps, rather than saying that countries with an independent central bank and currency “can always borrow more of that currency” we should qualify this by adding “until now” and “only in the case of major economies”. Much of my work is on the Caribbean: Jamaica is a country that has, over the years, printed money, but this doesn’t change its chronic need for US Dollars to sustain its import bill. The more Jamaican dollars the government prints, the more likely people are to get hungry and angry. We just don’t think about this in the context of the UK because it hasn’t been an issue for the past 30 years or so. Yet I’ve often wondered whether the UK could really be riding for a fall here, and is increasingly looking like a “small state” (a subject of a planned future blog). With total public/private debt at 500% of GDP or more, Brexit, a looming property price collapse and potential mass outflow of FDI, I think lazy assumptions about the enduring security of Sterling could well be misplaced. A crisis could be devastating in both extent and rapidity. I have friends in the City who reckon that all of this has already been “priced in” to the recent fall, but I’m personally far from convinced.

  8. Terrific suggestions. A combative stance will never be constructive. By carefully giving ground to the beer analogy (though obviously bizarre), we can bring that person with us. If we attack, we will see entrenchment and polemicism.

  9. Thanks everyone for your comments. Apparently it’s the most commented-on SPERI blog so far, which suggests that it is either nonsense, or provocative. I hope the latter. Thanks for engaging with it: I really appreciate all of these comments, and thank you for taking the time to add them. I hope I’ve at least done them justice in my responses. Best, Matt.

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