Thursday, November 9, 2017

Simon Wren-Lewis — What really caused the financial crisis

The Global Financial Crisis (GFC) defines how we think about our recent past, our present and our future, yet there is no clear consensus account of why it happened. There have been so many explanations put forward....
Mainly Macro
What really caused the financial crisis
Simon Wren-Lewis | Professor of Economics, Oxford University


Ralph Musgrave said...

I left a comment at Wren-Lewis's site. It normally takes him a good 24 hours to publish comments. My comment was thus:

The popular belief that banks were over-leveraged is an understatement: the reality is that banks should not leverage AT ALL. At least the clutch of Nobel laureate economists and numerous other economists who back full reserve banking agree that a “zero leverage” system is best.

Leveraging appears to bring a benefit, namely that more credit / money can be created for a given stock of base money than if leveraging is banned. The flaw in that argument is that creating extra base money costs nothing, thus it is easy under a “zero leveraging / base money only” system to issue whatever amount of base money is needed to bring full employment. Thus not only does leveraging achieve nothing, but it imposes huge costs when banks fail.

Matt Franko said...

The CB idiots put like 2T of risk free assets onto the members in like a month or two... :p