In relation to economics, governments are like Jack Nicholson’s marine colonel in the Aaron Sorkin movie A Few Good Men: “You want the truth? You can’t handle the truth!” Their assumption seems to be that we can’t be trusted to face facts and cope with uncomfortable realities about how the world works. And—let’s be honest—there’s probably something in that. Although we the people will never admit as much, we would on the whole prefer to be spared difficult truths. As a character remarks in Martin Amis’s novel The Information, “Denial was so great. Denial was the best thing. Denial was better even than smoking.” Unfortunately, in this case, denial won’t work. When the economic currents running through all our lives were mild and benign, it was easy not to think about them, in the way that it’s easy not to think about a current when it’s drifting you gently down a river—and that, more or less, is what we were all doing, without realizing it, until 2008. Then it turned out that these currents were much more powerful than we knew, and that instead of cosseting us and helping us along, they were sweeping us far out to sea, where we’d have no choice but to fight against them, fight hard, and without any certain sense that our best efforts would be enough to get us back to shore and safety.
That in essence is why I’ve written this book. There’s a huge gap between the people who understand money and economics and the rest of us. Some of the gap was created deliberately, with the use of secrecy and obfuscation; but more of it, I think, is to do with the fact that it was just easier this way, easier for both sides. The money people didn’t have to explain what they were up to, and got to write their own rules, and did very well out of the arrangement; and for the rest of us, the brilliant thing was, we never had to think about economics. For a long time, that felt like a win-win. But it doesn’t any longer. The current swept too many of us out to sea; even when we got back to land, those of us who did, we can remember how powerful it was, and how helpless we felt. It’s a gap we need to close—both at the macro level, in order for us to make informed democratic decisions; and at the micro level, in terms of the choices we make in our own lives.
A big part of this gap is almost embarrassingly simple: it’s to do with knowing what the money people are talking about. On the radio or the TV or in the papers, a voice is going on about fiscal and monetary this or that, or marginal rates of such-and-such, or yields or equity prices, and we sorta-kinda know what they mean, but not really, and not with the completeness that would allow us to follow the argument in real time. “Interest rates,” for instance, is a two-word term that packs in a great deal of knowledge of how things work not just in markets and finance but across whole societies. I know all about this type of semiknowledge, because I was completely that person, the one who sorta-kinda knew what was being talked about, but not in enough detail to really engage with the argument in a fully informed, adult manner. Now that I know more about it, I think everybody else should too. Just as C. P. Snow said, in the late 1950s, that everyone should know the second law of thermodynamics,* everyone should know about interest rates, and why they matter, and also what monetarism is, and what GDP is, and what an inverted yield curve is, and why it’s scary. From that starting point, of language, we begin to have the tools to make up an economic picture, or pictures. That’s what I want this book to do: to give the reader tools, and my hope is that after reading it you’ll be able to listen to the economic news, or read the money pages, or the Wall Street Journal, and know what’s being talked about and, just as importantly, have a sense of whether you agree or not. The details of modern money are often complicated, but the principles underlying those details aren’t; I want this book to leave you much more confident in your own sense of what those principles are. Money is a lot like babies, and once you know the language, the rule is the same as that put forward by Dr. Spock: “Trust yourself. You know more than you think you do.”
* The best concise explanation is that given by the British musical duo Flanders and Swann, who were the UK’s version of Tom Lehrer: “Heat won’t pass from a cooler to a hotter, you can try it if you like but you'd far better notter.”