“Here’s your money,” is the near universal refrain from the bankers to the politicians. “We want our laissez-faire economy back. If you won’t give it to us, we won’t lend and there won’t be any recovery. And if that’s the case, it will be your fault.”
People have pondered long and hard since last September whether the US government was right to allow Lehman Brothers to collapse. Some believe that it was a reckless act that imperilled the global financial system. Others think it was a necessary shock that gave us at least a chance of changing behaviour in the financial system and checking the bubble mania of recent years.
I am in the latter camp, but find myself increasingly feeling that the opportunity to reform the financial system has been fumbled. We have had the pain without the gain, so to speak. The view now seems to be that the crisis of last autumn was so scary that it is imperative that the system should be shored up quickly, even at the cost of effective reform. Hence the queue of banks on either side of the Atlantic clamouring to repay their government money. They want to get back in the game as fast as possible.
The Lehman crisis was supposed to shock the financial system into behaving better—to force it take fewer risks with investors’ (and ultimately taxpayers’) funds. But far from cowing the bankers, who have recovered their bounce, it has cowed the politicians, the very people who were supposed to take charge and enforce new rules. The best hope for change now probably lies with the central bankers. Let’s hope they rise to the challenge.
This article first appeared in “Crisis Watch” in the July issue of Prospect
Quantitative easing: hair shirts for monetarist economists
The credit crisis is producing some odd bedfellows. Take Tim Congdon, who is one of our more hair-shirted monetarists. Congdon has been one of the leading supporters (and intellectual authors, if some are to be believed) of the quantitative easing policy pursued by the treasury and the Bank of England. This lines him up alongside those he would usually count as his intellectual foes—the Keynesians and big government men.
In the third extract from Toby Muse’s interview with Martin Amis, Toby Muse discusses Obama’s election, and the implications for America’s relationship with rest of the world. (If you missed it, Part 1 and Part 2 are here.) Since 9/11, Amis has been seen as an increasingly conservative voice on world politics, particularly controversial with former friends on the left. As Tom Chatfield notes in his short article to accompany this interview, he has even appeared “nervously out of kilter with his times”. But in today’s extract we see a different Amis; one surprisingly optimistic, even idealistic about the future. It is a revealing moment, which even he seems surprised by: “I keep on trying to contain my excitement, and dampen my hopes, but…there is no telling what he [Obama] might do”. Enjoy!
The sit-in at Thailand’s main airport seems to be coming to a close. But the country remains deeply troubled. In many ways this should be surprising. Thailand was never colonised, has been relatively prosperous, and has a strong civic tradition rooted in its revered monarchy. Nonetheless the country is historically unstable – a coup, on average, every 3 years. And its been getting worse. William Barnes has just put up an article giving the full background – and arguing that, while Thailand’s disgraced billionaire former Manchester City Owner and ex-leader Thaksin might be banned fr the country, he is still behind the country’s turmoil. Barnes writes:
Despite exile, disgrace and numerous corruption verdicts, a Thaksin-backed party has trounced its opponents in every election so far this century. Thaksin might be loathed. But his critics simply can’t match the mix of grandiose talk about “a better, bigger future for the suffering villager” and populist policies like village grants, loans to small businesses and cheap healthcare that cemented his appeal among poorer Thais.
Read the article here, and, if you fancy, leave comments or questions for William below. As usual he will follow up on any queries if you ask nicely.
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