Newsnight – economists discuss the ‘graphs of 2011’

This week I appeared on Newsnight with Gillian Tett of the FT and Louise Cooper of BGC Partners. We discussed our graphs of 2011 (see mine below) and wider questions around the global financial crisis this year – and how ecnomists and policy makers need to respond.

Watch the show on iPlayer for the next 5 days here. Our discussion begins at 33 mins.

Restoring Faith in Finance

Debtonation Readers: This is the full version of my latest blog for Huffington Post:15th March, 2009

Once a-ponzi time, millions worshiped at the feet of the Wizards of Finance.  These Wizards preached an economic religion that promised security and an abundance of riches from the ‘Emerald City’ — Wall St.

Investors following this religion were led to believe that they could make capital gains effortlessly and endlessly.

To make these gains, it was argued, there was no need for protection from the authorities. 401(k) plans were safe in the hands of the Wizards. There was also no need for investors to engage in hard work: to invest in research; to engage more labor; to sweat at making goods or delivering services.

There would be no need to save.  Money would be made effortlessly.

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Disarming the Financiers

1st December 2008

Watching our British politicians squabble and spin this last week over the Pre Budget Report – while Rome burns –  was depressing. Why are our politicians so off-beam? Why does their response to this crisis seem so petty and botched?

The answer may lie in their ties to the finance sector. The fact is we are experiencing what will be a prolonged Bankers’ Depression – born in the City of London, not in the US sub-prime market. Neither of our major political parties is willing to admit that; to analyse the crisis in those terms and therefore to lay the blame on the finance sector and to rein it in. They are too compromised.

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Interest rates, Keynes and the longevity of the rentier

The Prime Minister, Gordon Brown, speaking on Radio 4’s flagship current affairs programme this morning, repeated something he says regularly: that ‘interest rates are low’ and that his government, through the Bank of England, kept them low. The question the BBC should have asked is this: if interest rates are low, and have been so, why on earth are people/companies/banks having such a hard time paying debts? Surely the Credit Crunch crunched, because debts – of banks in particular – became both too large, too expensive, and unpayable? Do small businessmen/women pay low rates on  investments? Mortgages? Credit Cards? Car loans? Does the PM live/work on another planet?

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Ratcheting up the interest rate rack of torture.

In this big bad world of the Credit Crunch, powerful central bankers – civil servants all – have bent over backwards to help powerful and rich private bankers.

On one day, ‘debtonation day’, central bankers in Europe and the US pumped an eye-watering $150 billion into the financial system, to keep big banks afloat. According to Bloomberg, the US’s Federal reserve has ‘cycled $2.58 trillion through U.S. money markets since December’. (Bloomberg 8th August, 2008).

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What have Putin, Hu & Greenspan in common?

Have been listening to debates about the conflict in Georgia over the week-end. There has been much wailing and gnashing of teeth about Putin’s disregard for democracy. In a similar vein, western commentary about President Hu Jintao’s Olympic Games is never complete without some tut-tutting about democracy and human rights in China.

Yet these leaders have in reality much in common with Alan Greenspan, former chairman of t he US Federal Reserve, who is held in the greatest esteem by western commentators. He came to London recently to promote his book, and I attended one of his sessions at Chatham House. The deference from the British political and media establishment was nauseating. The Prime Minister had already honoured him with a knighthood, so deferential is he. Yet this is Greenspan on democracy, as expounded in the columns of the Financial Times last week:

“It has become hard for democratic societies accustomed to prosperity to see it as anything other than the result of their deft political management. In reality, the past decade has seen mounting global forces (the international version of Adam Smith’s invisible hand) quietly displacing government control of economic affairs. Since early this decade, central banks have had to cede control of long-term interest rates to global market forces”

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