The Grand Delusion
We built an economy on inflated house prices. What could possibly go wrong?
It is probably the greatest example of collective delusion, what we now call “group think”, in economic history. Makes Tulip mania look like sound economics. For the last thirty years Western economies, and the UK in particular, have run a fantasy economy based on speculative inflation of house prices. Chancellors, Bank of England governors, social democrats and right all came to believe in a kind of financial perpetual motion machine: a rise in wealth that requires no actual value to underpin it. It is the very definition of a Ponzi scheme, so called after the pyramid-selling fraudster, Charles Ponzi, in the 1920s. So how did we get here?
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