In anticipation of the chancellor's Autumn statement, Lord Skidelsky goes on the attack:
The chancellor’s policy is based on the wrong theory of the economy; the BoE’s on the wrong theory of money. Failure was predictable.His argument is simply Keynesian. Keynes would have argued that:
...cuts would reduce the level of total spending in the economy and thus perpetuate the slump.As for the bank:
The BoE’s mistake has been to believe it is the supply of money that is critical for economic recovery; Keynes said it was the demand for money.