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Budget Resolutions and Economic Situation

I am grateful to my hon. Friend, as this is a critical problem. It is a problem of expectations; it about the human mind, which is extremely difficult to predict. I was saying that, as we go through, we could find that people lose faith in cash. If they do that, they will spend it, and move into real value. Keynesians could end up celebrating an apparent boom, but actually one that is a crack-up of the currency. I sketch these events not to frighten, but to set out a perspective for the House of which we should be aware when we know that the central banks and the Bank of England have deliberately inflated this bond market bubble. We could end up facing a choice: if prices and wages are accelerating, but less quickly than the money supply, the Bank of England will have to choose whether to supply more money or whether to abandon that monetary inflation and reveal the underlying havoc created by decades of inflationary money. Perhaps new money, instead of real resources, can be used to paper over the cracks. Perhaps expectations can be managed to avoid the bubble bursting. If I were to quote with just a little adaptation something that Hayek wrote in 1932, I would say: ““We must not forget that for the last 86 or 88 years, monetary policy all over the world has followed the advice of the monetary activists. It is high time that their influence, which has already done harm enough, should be overthrown.””