If the entire banking system, and the property market gurus, and the beneficiaries of the spin-off economic activity and stock market appreciation all become cheerleaders for the continuation of credit-fuelled bubbles on the ground that “this time it will be different” the regulator may still stand in opposition.
F&S had already warned in their Monetary History that: ‘If [this] interpretation has any validity, it leads to the somewhat paradoxical conclusion that confidence in the efficacy of monetary policy in the 1950s was inversely related to monetary stability. As that confidence has grown, it has produced a growing instability in the stock of money. Hopefully, the process is not explosive but self-limiting’.