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The Nobel Committee proved that its members still have a sense of humour, or terrible timing. One of the two. The Prize for Economics has been awarded to Ben Bernanke, former chair of the US Federal Reserve from 2006 to 2014, along with two other economists – Douglas Diamond and Philip Dybvig. They are professors at the University of Chicago and Washington University, St Louis, Missouri respectively.

They were rewarded for furthering the understanding of how banks perform in a financial emergency. Bernanke’s great academic insight was that in the Great Depression, or at its start in 1929, the failure to save the banking system made a downturn a disaster, that then rippled across the world. The resulting political turmoil of the 1930s led to war and the deaths of tens of millions.

So, it follows, if you want to avoid a repeat of the Great Depression, policymakers should always prop up the system.

This is what inspired the 2008-2009 rescue of the system. Save the banking system with bailouts and slash interest rates to save businesses, increase activity and smooth the way out. Quantitative Easing, crudely called money-printing, was added.

The problem is that once you’ve started this process it’s difficult to stop. If every time you sense a downturn coming you slash rates or keep them low and use QE, when can an economy ever get back to anything like normal, pricing money properly, teaching us about risk and reward? Downturns are part of economic life, not everything can be smoothed out forever.

Instead, we consumers were taught by bailout economics to expect whenever something goes wrong that the authorities will be along with a large cheque of other people’s money. We now barely blink when we hear the government is going to spend another £100bn. Having cocked up energy security and supply, governments are now spending tens of billions of borrowed money providing an energy rescue. This followed furlough during Covid, justified but too long-lasting because the government in Britain’s case kept lockdowns going well beyond what was sensible or affordable.

Bernanke supporters will say he and his acolytes set out to minimise harm, to prevent disaster. The fear at one point was deflation rather than inflation. Now a pandemic and massive stimulus, and low rates that lasted too long, have created the conditions for an almighty smash. Rates can’t be lowered now, inflation is high. Or has it peaked? No-one really knows, so where there is uncertainty, in a war era, there is the potential for panic.

Britain is front of the queue, with investor trust in the government trashed. Warnings lights are flashing in the Eurozone too, but Britain is now regarded as an outlier with investors thinking it doesn’t know what it is doing, and prepared to place bets accordingly.

It is the misfortune of Liz Truss, and the rest of us, that just as bailout economics was about to hit the wall she put her foot on the accelerator.

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