Queen is posted a lesson in economics

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THE Queen has been sent a letter by a group of eminent economists explaining how "financial wizards" failed to "foresee the timing, extent and severity" of the economic crisis, it was reported yesterday.

The three-page letter, signed by London School of Economics professor Tim Besley, an external member of the Bank of England's monetary policy committee, and political historian Peter Hennessy, was sent after the Queen reportedly asked on a visit to the LSE why nobody had predicted the credit crunch.

The letter ends: "In summary the failure to foresee the timing, extent and severity of the crisis and to head it off, while it had many causes, was principally a failure of the collective imagination of many bright people, both in this country and internationally, to understand the risks to the system as a whole."

The letter talks of the "psychology of denial" that gripped the financial and political world and says "financial wizards" convinced themselves they had found ways to spread risk throughout markets – a great example of "wishful thinking combined with hubris".

A Buckingham Palace spokeswoman would not discuss the letter but said: "The Queen always displays an interest and is kept abreast of current issues."