One of the intriguing questions about the current financial crisis is why most economic commentators, those in authority in our central banks and most of the politicians who are so certain as to the remedies which should be now applied were unaware that it was looming.
It is curious too that most of our media have not asked this question.
[Cartoon by Nicholson from "The Australian" newspaper: www.nicholsoncartoons.com.au ]
As we noted here on 9 December 2008 (“Financial crisis: The Queen asks ‘Why did nobody notice?’ 9 December 2008) it was left to our Sovereign to ask the question, “Why did nobody notice?”
According to a report in the Daily Express of 28 November, 2008, The Queen’s question “wrong-footed” academics when she visited the London School of Economics. They had expected “chit-chat” rather than direct and serious interrogation.
….economists apologise to The Queen…
Now The Observer reports that a group of eminent economists have apologised to Queen Elizabeth II for failing to predict the financial crisis. The newspaper says that a letter has been sent to The Queen in response to her question.
It says the letter states that "financial wizards" who believed that their plans to manage risky debts and protect the financial system were infallible were guilty of "wishful thinking combined with hubris".It speaks of a "psychology of denial" that gripped the political and financial world in the build-up to the crisis.
The economists said financial experts convinced themselves and the world's politicians that they had found clever ways to spread risks across the markets.Signatories to the three-page letter included Tim Besley, a member of the Bank of England's monetary policy committee and historian Peter Hennessy.
The newspaper said the content was discussed during a seminar with a group of leading economists in June, including Nick MacPherson, a permanent secretary at Britain's Treasury, and Goldman Sachs chief economist Jim O'Neill.
The letter concludes: "In summary, Your Majesty, 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."
…The Queen is interested in current issues…
The Palace declined to comment on the correspondence, but said The Queen often discusses current issues with experts.
"The Queen always displays an interest in current issues and is kept abreast of current issues. Obviously the recession is very topical," Buckingham Palace said in a statement.
The Sun reported that a professor at the London School of Economics, Luis Garicano, confirmed that in discussing the origins of the crisis during her visit, The Queen had asked: "Why did nobody notice it?"