RP’s Diary
Three major failures contributed to the global financial car crash • There was a failure of banking and bankers – imprudence and irresponsibility, tinged with instances of criminal behaviour, insider trading, mis-selling, deceit and fraud; • There was a failure of central bankers – they were seduced into assuming the self-stabilising properties of markets,…
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Where have all the safe assets gone?
Shortage may usher in new banking system
While it has already become a cliché to say that there is no such thing as a risk-free asset, policy makers and market participants are only just beginning to recognise what a major shift this is. If we are to get back to anything like the traaditional financial system, renewing the supply of such…
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Which anchor for money?
Notes on talk to the Santa Colomba meeting
The supply of money needs to be limited or ‘anchored’ to prevent excessive supply reducing its value. At present money is supposed to be limited by central banks following inflation targeting models. However, this paradigm has lost traction under the strain of the crisis. In effect we have returned to a discretionary monetary policy,…
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Carney rules
Can we expect a restructuring of Britain's MPC?
Interviewed by Anna Edwards on Bloomberg TV this morning (July 17), before the minutes of the MPC’s July 4 meeting were released (my segment starts 5 minutes into the clip), I said that Mark Carney would want the new Bank of England to speak with a clear, single, voice. I said that this…
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The deal to kill reform
Conclusion of the series
From the analysis in the first three parts of this series, the political bargain should have become clear. There are three major players – governments, centralbank\regulators and the mega-banks. As a result of the forces at work, as outlined in Parts 1-3, they have reached an agreement. This is all the more powerful for…
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Part 3: Why reform is failing
Part 3 looks at reform of banking
Why is the effort to reform the global financial system failing? The previous posts in this series reviewed the failure to reform central banking. This final column looks at the fading prospects for a meaningful reform of commercial banking and then examines the ‘scapegoats’ used by governments. We show how the three major players…
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The epiphany of central banking
Part 2 of a new series
Having listened to the three witches, and acted accordingly, only to be betrayed ‘in depest consequence’, our hero ‘Macbeth’ reaches his ascendancy, which marks the start of his downfall. He has a moment of realisation… Have central banks also reached an epiphany? Central banks have been instructed to keep their eyes not only on…
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Sleeepwalking to destruction
Part 1 of a three-part series
I do not suppose that central bankers like to be compared to witches, but for my money the best account of how the financial crisis came about is in Macbeth. Banquo warns Macbeth to be wary of the witches’ implied promises: And oftentimes, to win us to our harm, The instruments of darkness tell us…
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Central banks into equities
A rare move out of the money trap?
When I first proposed that central banks might hold a basket of diversified equities on the assets side of their balance sheets, it was an unheard-of notion. My friends advised me to take it out. “People will think you’re crazy”, they said. Now it turns out that that is exactly what a growing number of…
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Fred Bergsten calls for monetary reform
Switzerland among 22 countries in the dock
Fred Bergsten of the Peterson Institute is the “enfant terrible” of US international monetary and economic debate. Fending off the passing years, it is a role he has played with great panache for the best part of half a century. Always at the centre of things, always provocative, frequently infuriating, he has, as head of the…
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