A credit boom before each bust
Here is a graph that shows the four economic downturns Britain has been through (red lines) over the past forty years. What I find strking is that each downturn was preceded by the same thing: a surge in the growth of money (blue line). In other words, the bust followed an unsustainable credit-induced boom. The motives and justification behind monetary policy leading up to each boom/bust might have been different. In the early 1970s, monetary policy was shaped by Competition and Credit Control (CCC) reforms. In the late 1980s, those who decided monetary policy wanted to shadow the Deutschemark, then join the Exchange Rate Mechanism (ERM). After that unhappy experience, monetary
