22 Feb 2021

The notion of “consensus” makes active investors drool in the manner of Pavlov’s dogs. This is because predicting correctly when consensus is wrong can be profitable. Consensus in itself is useless, a passive snooze, devoid of critical thought – if it were a dog it would be asleep, heart-warming to see but catching no rats and barking at no burglars.

Given that consensus is essentially unprofitable, it’s current popularity is somewhat perplexing and even alarming. Everywhere one looks it is providing comfort to those who do not wish to ask difficult questions.


The advocates of lockdowns to combat Covid in the UK have achieved consensus and have been able to abandon any pretence of distinguishing between correlation and causation. Covid cases rise and fall – whenever they fall after a lockdown (and there’s always a lockdown) , post hoc ergo propter hoc triumphs unchallenged. If cases continue to rise it is always because lockdown was too late, too light or too short. 

There is no opposition from any political party on this point, despite the probability that the lockdown of the economy is making the poor relatively poorer and it was once seen as the role of Labour to stand up for the underprivileged.


The last time I saw this level of political consensus was before the 2015 general election when every political party demanded that greater and greater numbers of houses (in practice, mostly flats) needed to be built – this on the basis of a collective mistaken understanding of the Barker report of 2003, the proposal of which was to reduce property prices by creating an oversupply. 

The oversupply began enthusiastically but destroyed the middle-sized privately-owned house building industry after the financial crisis of 2008-9. Yet things soon picked up again, albeit with the big housebuilders now in full control. The consensus to build survived the crisis (presumably because it was characterised as an extraneous event) and those blocks of flats, with or without cladding, have continued to rise like willowy magic mushrooms.


In early 2021, consensus in all its manifestations is being carried through the streets on the shoulders of a cheering mob. 

I heard a discussion programme (on the BBC) about whether young people are having a worse time than older people. There were no fewer than six experts who were all invited to give an opening statement of their position. They were unanimous that the young are indeed victims. I would have appreciated testimony from some arthritic crone saying either that they didn’t remember that being young was so bad or indeed that it was terrible. Luckily there is an “Off” switch on my radio.

Here is a Tweet from Andrew Neil (who it should be said is about to launch a new TV news programme as a rival to the BBC, among others). This is from 18 February.

Should the state play a bigger role post-pandemic? Good question.

@BBCr4today  just devoted its prime post-0800 slot to it. 

Three guests — all in favour of bigger, more active government. The consensus was never challenged. BBC diversity of opinion in action.

There now, quite suddenly, seems to be a strong consensus that government intervention is the answer to everything but it is probable that the UK electorate would never have voted for this. Indeed many will have  imagined that they explicitly rejected such a proposition in December 2019 when they preferred Boris Johnson’s Conservatives to Jeremy Corbyn’s neo-Trotskyites. 

At a time when most of the private sector has been put into an induced coma, there is no realistic limit to the cost of running the economy as a state enterprise. That sounds a little worrying. Let’s check back with consensus for comfort again.


Everyone, so it seems, agrees that governments can afford to borrow unprecedented sums because interest rates are at unprecedented lows. In other words servicing the national debt has never been cheaper, pound for pound. Moreover, consensus believes that the only mistake that could be made would be to borrow too little because the risk of too much stimulus is miniscule compared to the danger of too little. This is the view of Janet Yellen, ex-chair of the Federal Reserve and Biden’s new Treasury Secretary, who is supporting a $1.9 trillion stimulus package being considered by Congress.

“We think it’s very important to have a big package that addresses the pain this has caused…..the price of doing too little is much higher than the price of doing something big”. (Interview with CNBC)

Long gone are the days when the Federal Reserve was known for statements such as “the job of central bankers is to take away the punch bowl just as the party gets going”.


It is fair to say that the consensus has not quite been reached on the consequences of nation states borrowing and spending without limit. The historical examples tend to be discouraging. In France in 1789 and Germany in 1921 the state began issuing unsecured debt to fund current spending. The result was devaluation, inflation, food shortages and Napoleon and Hitler respectively.  

So let’s agree not to go there.

A small but high profile minority think the answer is to bypass government issued currency (aka fiat money) entirely by investing in cryptocurrencies like Bitcoin. There are a number of obvious problems with this. One is that, despite a number of heroic efforts, Bitcoin is not readily exchangeable for legitimate goods. Given its volatility, such transactions must work out badly for the buyer or the seller. If you were one of the people who bought some cake and coffee at a hip pop-up stall a few years ago you may well be regretting that you paid £50 at today’s valuations.

Bitcoin’s value is grounded in the US dollar which only really works if the dollar continues to be a relatively stable and widely acceptable currency. If the dollar is devalued in the wake of infinite money supply and rising inflation the price of Bitcoin will certainly reflect the latter. Arguably it is doing that already. 

As an investment Bitcoin shares many characteristics with gold. It is difficult to own, highly illiquid and of no practical use. Those who prize exclusivity might see those as positive features.


It is not yet consensus but there is a growing murmur that if a central bank prints money for its own treasury, this is a case of the government issuing its own debt to itself which in turn means that the debt can be cancelled with impunity. Remembering that the function of consensus is to provide comfort in the face of difficult questions, it seems probable that we are going to hear more of this.

The objection here is that this only works if others retain their faith in the viability of the currency. If I know that the government can print as much money as it wants I will immediately and with some justification question why it needs to tax me. This eats into the heart of any perceived citizens’ social contract.

Next, I will rush to invest in real assets that might deliver me some protection when devaluation leads to inflation. And obviously I will be hastening that inflation through my actions. 

I began by saying that consensus is useless; I should have added “at best” because it is potentially very dangerous. I am now incorporating a high degree of “inflation watch” into my personal investment strategy. While exercising my usual attention to scepticism, crowd behaviour, the nature of belief and probability.     

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