So, who, or what, is to blame? Why, 15 years after the start of the last financial crisis, might we be seeing that of another? For many, it is the fault of a long period of ultra-low interest rates imposed by central banks. For others, the cult of the bailout is at fault. We do not need to look far to find the intellectual origins of such views. They lie in Austrian economics. As Brad DeLong puts it in his excellent book, Slouching Towards Utopia, the view is that “the market giveth, the market taketh away; blessed be the name of the market”. The Austrians are not altogether wrong. They are not altogether right either.

The essence of the argument is that the transatlantic financial crisis of 2007-15 was the product of over-loose monetary policy. Thereupon, over-loose monetary policy, plus bailouts, thwarted the creative destruction that would have returned the economy to vigorous health. Finally, after Covid, another burst of over-loose monetary policy, combined with aggressive fiscal policy, caused high inflation and still more financial fragility. Now, all the chickens are coming home to roost.

The story is simple. But it is wrong.