The Chinese authorities have substantially reduced the level of official intervention in exchange markets since the third quarter of 2011, and China has taken a series of steps to liberalize controls on capital movements, as part of a broader plan to move to a more flexible exchange rate regime.

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In other words, the expansion of credit, caused by a flexible, expandable money regime, set the whole economy ablaze.

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But, as I said on Thursday, the biggest argument against that you hear from people at the Bank is that our "flexible inflation targeting" regime already gives you everything you might have wanted from a nominal GDP regime.

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The letter says that "Britain is being taken in the wrong direction", and our "reputation for having an attractive tax regime, intelligent regulation and a flexible labour market is under threat".

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Milton Friedman and others reminded us decades ago that such internal adjustments necessary to reverse an external deficit were ultimately the same under a gold standard, flexible exchange rates, or some hybrid exchange rate regime.

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