Interview: Andrew Smithers of Smithers & Co

“If you wanted to point the finger at anyone, you’d say Alan Greenspan has been a major disaster. He shouldn’t have allowed the bubble to develop, and he certainly shouldn’t have acted as its cheerleader. The old theory was that you couldn’t measure asset prices – which is nonsense – and it didn’t matter anyway because if you had asset deflation, you could simply adjust policy to cope with it.

“Well, I don’t think anybody could believe that any more. The mess we’re in at the moment is not responding readily to interest rate cuts. We’ve made a big mistake in central banking,” he concludes.

Mr Smithers says some of the media gloom is misplaced, however. He takes heart, for example, in the fact there has been no destruction of value – another common misperception he is keen to point out.

“The wealth of an economy consists of its physical capital and the knowledge of its people. These are in no way lower than they were a year ago. One of the reasons for being optimistic is that we are not, at the moment, actually destroying wealth – it’s just being repriced. But output has dropped – unnecessarily, and that’s why I blame bad central banking. This needn’t have happened,” he says.