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John's presentation at the 44th Economics Conference of the Austrian central bank (ONB).
There is wide agreement that Brexit and Trump's election were caused by economics. But this and the prescriptions - tweaks to the income distribution, more aid to failing industries and districts - understate the scale and nature of the problem.
Business history, of a sort, was made last week by the French pharmaceutical company, Sanofi, its blood thinner Plavix familiar to those with arteriosclerosis,...
Recent stumbles by Bernie Sanders illustrate a misdirection in his attack on the banking establishment. The central problem is not so much “too big to fail” but “too complex to fail”.
The belief that the zero lower bound to interest rates is a significant obstacle to stimulating demand supposes that there is a host of projects that promises a prospective return less than zero but more than, say, minus one half per cent. This completely misunderstands the nature of the barriers to long-term productive investment. We need less financial ingenuity and more common sense.
The Parliamentary Commission on Banking Standards, which reported in 2013, recognised the central significance of executive responsibility for systemic failure in the sector. It proposed a senior managers regime which would hold executives liable for wrongdoing in activities for which they had responsibility even if they had no specific knowledge of the improper conduct. Having accepted this recommendation, the UK government is now backtracking.
British regulators have finally published their report into HBOS, the bank formed from the merger of Halifax with Bank of Scotland, more than seven years after its collapse. The 600-odd pages contain much detail on events and personalities. But there are general lessons for all businesses. Avoid the diversifier’s fallacy. Beware the winner’s curse. Fear adverse selection.
The financial sector in the 1980s and 1990s was characterised by a rush to incorporation. The mantra of “shareholder value” restored the nexus between finance and business that Smith had feared and Brandeis denounced. And the stage was set for negligence and profusion to prevail once again.