The credit boom caused the housing boom which caused the banking crisis which caused the socialisation of debt which has caused a sovereign debt crisis

Unbearably humid evening in an upstairs panelled hall in the West End.  Even with the windows open the air was still.  Forty or so dark-suited men and a few women finished their glasses of wine and sat down to listen.

The speaker was a public figure (although I had never heard of him).  A self-styled adherent of the Austrian School.  He talked for an hour on the economic crisis.

He started by asking some questions: 

"If the Austrian School has any merit, what does it mean for the banking sector?  Is economics a positive applied science?  What do we mean by the monetary theory of the trade cycle?

"The interaction of human beings is what we call economics... The State is an enormous player in the economy... Public choice theory - you can see the lobby groups separating...

"Look at how the State creates expectations... Morality is a key part of economics... When the students were rioting in London we actually saw Communist flags in Parliament Square - there is a risk that people will turn to authoritarian alternatives as things get worse...

"Society is the community in action... Society is a dynamic process with choices and actions... The State is a territorial monopoly on the use of force...

"Profit is the measure of value you have created for other people... The history of the last hundred years is of intervention with borrowing, and the debasement of the money supply...

"The Austrian School intellectually survived the recent crisis... Where is the crisis going to end?  What options do we have other than the Austrian School?

"Honest money is money which holds its value... The central challenge of our day is organising our monetary arrangements... The Austrian School offers important insights...

"The Chinese State dominates only thirty per cent of the Chinese economy whereas the UK State dominates forty per cent of our economy... However the Chinese State does not need to rely on democratic persuasion... Various Austrian School economists believe China is about to hit the buffers...

"Leave interest rates to the market - they are a vital price signal that co-ordinates the economy... We have adopted social democracy - or Conservative interventionism if you prefer...  State direction is accepted in banking whereas we wouldn't accept it anywhere else...

"It is not good that we have credit expansion well in excess of real savings... The State should limit itself to enforcing property rights and contracts... Hayek suggested fiat monies should float freely and compete freely although this is not as good as using gold... Abolish central banks and deposit insurance... Move to one hundred per cent reserve banking...

"The credit boom caused the housing boom which caused the banking crisis which caused the socialisation of debt which has caused a sovereign debt crisis."

After the talk there was sombre applause.  My head ached slightly (was it the economic theory, or was it the fourth glass of wine?).  The worried-looking economists went down the elegant staircase and out into the sultry night.