Lionel Barber, the editor of the Financial Times, was our guest at a Power Lunch in Westminster this week, talking about the financial crisis, the economic downturn and the political response to it. The discussion that took place (off-the-record, unfortunately) was certainly a fascinating one.

It seems to me that economists are more or less agreed on the root cause of our present difficulties: a massive credit bubble built up, then burst, and now we are suffering the predictable consequences. There is, of course, some disagreement on why the bubble got so large, with people like me blaming central banks and political interference, while others point to global imbalances and other factors. But where the real arguments are found is on the issue of what we do now.

Many respectable economists think that extraordinary times call for extraordinary measures, and that doing nothing is just not an option. The Banks needed to be bailed out, and will probably need to be nationalized. Liquidity must be increased, even if it means printing money and dropping it from helicopters. And the government must stimulate the economy with fiscal measures, regardless of the deficits they run up in the process.

Others (and I lean towards this camp) think there's more or less nothing politicians can do to 'fight the recession', since it's an inevitable result of the distortions caused by the credit bubble. There will be pain while the market adjusts, and that's regrettable, but we need to let things work themselves out before we can see the green shoots of recovery emerge. The extraordinary measures others propose will only cause more trouble in the long-run.

Whichever way you look at it, one thing is for sure: we are indeed living in financial times!