Spend less on what we lack, celebrate more what we have

The economic news this week has been grim: falling house prices, a credit squeeze, and a general sense of economic turbulence ahead. This week the International Monetary Fund predicted losses to financial institutions worldwide of almost a thousand billion dollars, and they've predicted a slowdown in economic growth in Britain over the next two years.

It would be wrong to minimise the pain and strain this will bring to people seeing the value of their house fall while mortgage payments stay high. Yet I suspect that in the long run what's happening is the return of sanity to what's sometimes felt like the economics of fantasy. The 171 per cent rise in average property prices in a decade, could give us the illusion that we're 171 per cent better off. But we aren't. And the idea that banks and building societies could lend out of all proportion to real economic growth was bound, one day, to come crashing to the ground. If illness is nature's way of telling you to slow down, then a credit squeeze does the same for an economy. Once in a while we all need to slow down.

Some thirty years ago the then editor of the Times, William Rees Mogg, wrote the most extraordinary book about inflation I've ever read. It began with an essay in praise of Jewish law and when I first read it I couldn't understand why. Rees Mogg isn't Jewish and Jewish law isn't economics. But then I began to understand. He was arguing that inflation, like over-borrowing, is the result of a failure to honour limits. We tend to think that if something is good, then more is better, and yet more better still, and we forget that there are real constraints until we collide with them. It's like the fabled politician who said: Yesterday we stood at the edge of the abyss, but today we've taken a giant step forward.

Time and again we've been reminded, these last few years, about the risks of ignoring limits. Our patterns of consumption are destroying the natural environment. Our pursuit of sexual pleasure is damaging families and the lives of our children. And the search for short-term profit is endangering economic stability. Which is why Rees Mogg, all those years ago, spoke about religious law, which honours limits by teaching us the habits of self restraint. So bad news today may lead to good news tomorrow if it teaches us to spend less on what we lack and celebrate more what we have.