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10-year retrospective: Lessons 7, 8, 9

Three more lessons! That's the lot

7. Neglect of international causes This is the most fatal flaw, as it is the one least understood  by economists, governments or bankers. My interpretation of the crisis emphasises its international dimensions – not only in the rapid spread of the crisis but also in its root causes (see Lesson 3). Yet this perspective is…
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10-Year retrospective: Lesson 6

The State has rewarded bad behaviour and bad banks

6. Expect more bad bankers and bad banks How has the state punished the financial industry for its crimes,  corruption and anti-social behaviour? By showering it with subsidies, privileges,  perks and by offering it protection from an angry public. And by reducing its profitability and capacity to change by piling new regulatory layers and requirements….
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10-Year retrospective: Lesson 5

Banks have not regained public trust

5. Banking can only be reformed from within This is another unavoidable lesson. Banking has not been reformed by actions taken by the state, central banks or regulators since the crisis. Indeed they have set back the prospects for improvement. There were two main strands in the policy response to the crisis. One was monetary…
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10-Year retrospective: Lesson 4

People know injustice when they see it

4. The people will have revenge The countries worst affected by the financial crisis, the United States and especially the United Kingdom, have since experienced severe political turbulence. I believe this can be directly traced back to the financial crisis and the way it was dealt with by governments, central banks and the financial elite….
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10-Year retrospective: Lesson 3

Why reform must be international

Gradually, inch by painful inch, the central bankers are losing their clothes – the comforting ideology that has enveloped them like a warm garment for more than a generation. This is the ideology, or “regime”, of central bank independence and inflation targeting (CBI+IT). Oh, how shy they are! Look how they hold onto any scraps!…
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10-Year retrospective: Lesson 2

Central banks into milch cows

A leading economist has predicted that central banks will  not remain independent much longer. His forecast was made  at  a Bank of England conference called to celebrate – yes – 20 years of independence. Guests included Mrs Theresa May, the Prime Minster. It was opened by the Governor, Mark Carney, who drew a different, but…
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10-Year retrospective: Lesson 1

The first in a series on lessons of the global financial crisis

The financial crisis showed up the defects of monetary models. These in turn reflected a flawed idea of money. That is why central banks failed to anticipate the crisis and could not deal with it effectively when it arrived. That is the message of The Money Trap. The lead-up to the crisis was marked by…
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Society’s monetary guardians?

More on central bankers and economics

The question raised by my previous article may be expressed as follows: If central bankers see themselves as guardians of society’s money, why do they think that contemporary economics provides them with an appropriate professional training, since the discipline offers no special insights either into the nature of society or into the nature of money?…
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Do central banks rely too much on economists?

Economics is of only limited help in understanding money

If  economics is likened to a religion it is easy to see how it may be viewed as dangerous. It may blind its devotees to the claims of competing world-views. If  economists arrogantly claim that their special insight gives them the right to prescribe policy, it may provide spurious legitimacy for harmful actions. It may lead…
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How we got into the money trap – and how to get out

Why the world needs a new kind of money

The world took time to get into the money trap. But with one bound it can be free. Since the 1970s governments have tried various approaches to the challenges of managing money. In the 1970s, they put full employment top. They used monetary policies to expand demand, taking risks with inflation. The results included high…
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