We failed to foresee recession: UK economists to Queen

Last Updated: Sunday, July 26, 2009 - 20:25

London: A group of top British economists
have written to Queen Elizabeth, acknowledging their failure
to forsee the timing, extent and severity of the recession
that has hit the country and the world, blaming it on "a
failure of the collective imagination of many bright people."

In their letter to the British monarch, signed by London
School of Economics professor Tim Besley, a member of the Bank
of England monetary policy committee, and eminent historian of
government Peter Hennessy, they said a "psychology of denial"
had gripped the financial and political world in the run-up to
the crisis.

The three-page missive blamed "a failure of the
collective imagination of many bright people". It was sent
after the Queen, during a visit to London School of Economics
in November last year, asked why no one had predicted the
credit crunch, The Observer newspaper reported on Sunday.

Despite these yawning imbalances, they said, "financial
wizards" managed to convince themselves and the world`s
politicians that they had found clever ways to spread risk
throughout financial markets -- whereas "it is difficult to
recall a greater example of wishful thinking combined with
hubris".

"In summary, Your Majesty," they said, "the failure to
foresee the timing, extent and severity of the crisis and to
head it off, while it had many causes, was principally a
failure of the collective imagination of many bright people,
both in this country and internationally, to understand the
risks to the system as a whole."

Besley stressed that the experts had not been in
"finger-wagging mode" and had agreed that the causes of the
credit crunch were extremely complex. "There was a very
complicated, interconnected set of issues, rather than one
particular person or one particular institution."

A spokesman for Buckingham Palace said the Queen has
displayed a particular interest in the causes of the
recession, summoning Bank of England governor Mervyn King to a
private audience earlier this year to explain what he was
doing to tackle it.

Official figures published last week revealed that
Britain`s economy has now been contracting for 15 months, and
the recession is deeper than any since the 1930s, outside of
wartime.

Bureau Report



First Published: Sunday, July 26, 2009 - 20:25

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