Cutting remarks from David Blanchflower in face of dangers that may worsen

The only rational explanation is they do not understand what is going on — or at least what Blanchflower says is going on.

His credentials are better than most in that, as a member of the Bank of England's monetary policy committee, he was the one who first saw that the excesses in the credit markets and the US subprime meltdown would lead to global disaster. His main complaint is that he was a lone voice on the committee and most of his colleagues misread the situation, so the right action was not taken.

It took the collapse of Lehman to push the MPC into drastic action to mitigate the effects of the financial tsunami. While what it did eventually helped, the benefits would have been much greater if it had acted earlier and on a still more dramatic scale.

His complaint now is that, having made one appalling mistake, the MPC is about to make another. It is ironic that he should say on a day when inflation came in well over target that deflation and a deleveraging debt spiral remain the major threat, but that is his position. He says the MPC's forecasts imply severe price deflation in a few months' time and the only way this can be avoided is if we have one of the fastest-ever V-shaped recoveries from recession to get us back to the levels of output we enjoyed before the crash.

This he thinks is highly unlikely. The lesson of the Thirties, which the present recession most resembles, is that not only was there a double dip, but growth in the recovery was anaemic for years. It is a feature of financially induced recessions that the way out tends to be longer in the making, largely because the banks take years to recover, so credit is in too short supply to finance expansion.

His prognosis is that a double-dip recession is likely, and we will not be rescued by the levels of growth the MPC is hoping for. So, far from sitting on its hands, the MPC ought to continue its programme of quantitative easing to try to avoid this slump turning into a debt spiral. The fact it is doing nothing is, he says, an even bigger mistake than its failure to see the crisis coming in the first place. Both times it has failed to see the danger.

Blanchflower believes the current political debate about who can cut fastest could make a dangerous situation even worse. Cuts must wait until we know for sure that the economy is on the mend, he says.

With the economy on a knife-edge, it is better to pay people to work inefficiently in the public sector than make them unemployed and pay them not to work at all. As for interest rates, they should be kept below 1% perhaps for as long as five years.