© 2019 by Henry Thornton. 

  • Grey Twitter Icon

July 26, 2016

The first step was to meet the guide who was to take us on the Tanzanian part of the safari.  Hussein turned out to be pleasant, extremely knowledgeable about the parks we visited, the animals and how they interacted with each other and the signs they gave to humans wh...

August 30, 2014

Sorting out confusion

How does monetary policy impact asset inflation?  This is a question that is not fully answered in economics, although many practical men of affairs have a pretty shrewd idea that it does. This paper suggests a simple theoretical framework that is...

June 4, 2014

... financial stability & monetary policy

Readers will be aware of my attempts to persuade the RBA to sort out policies to control asset inflation, so far as this is possible, distinct from monetary policy, which involves keeping the overall economy on an even keel with...

August 6, 2013

The Reserve Bank is widely expected to cut interest rates today. The economy is facing such a grim future that one can support such an outcome. But no-one, not even the Reserve Bank, is facing the main problem facing Australia, which is double-digit cost disequilibrium...

January 12, 2013

Tax capital flows to tame dollar.

If the current dilemma with Australia's monetary policy is not resolved, it will do great damage to Australian industry, as it did in the late eighties, when the correct conclusions were not drawn. A similar problem helped lead America...

April 12, 2012

... A Reserve Bank View 

As the great bard put it: ‘There is a tide in the affairs of men, which, taken at the flood, leads on to fortune …’. The tide was taken in 1983 and the floating of the Australian dollar was a reform that helped make Australia one of the most suc...

February 7, 2012

This is a time of great uncertainty – equivalent in the economic sphere to the fog of war.  Interest rates have been cut by 50 basis points to provide a measure of insurance against global recession. Will the Eurozone currency union end badly? Will China’s slowdown be...

November 6, 2011

I counsel the Reserve to keep its powder dry until the situation in Europe is clearer. If there is a bad outcome, a cut of up to 100 basis points may well be appropriate, and the Board should give the governor licence to make such a cut. But if Europe somehow finds a s...

November 3, 2009

The Reserve Bank will increase cash rates today.  The only question is whether this will be by 25 or 50 basis points, with 75 a long priced outsider and zero left at the gate.

The economic news has been mostly good since the board of the RBA last met.  Most importantly,...

March 2, 2009

'In every stock-jobbing swindle every one knows that some time or other the crash must come, but every one hopes that it may fall on the head of his neighbour, after he himself has caught the shower of gold and placed it in safety. Après moi le deluge! is the watchword...

Please reload


The next financial crisis ... is inevitable

The weekend AFR's article reporting the GFC work to save our financial system was interesting. RBA chief Glenn Steven is reported as saying something like: 'We flooded the system with liquidity'. (An action recommended by Bagehot all those years ago.)

Coincidentally, this week's Economist looks at the global equivalent under the heading 'Has finance been fixed?'

It concludes: 'Policymakers have made the economy safer, but they still have plenty of lessons to learn. And fracturing geopolitics make globalised finance even harder to deal with. A decade after Lehman failed, finance has a worrying amount to fix.'

Deep within the article is a statement I have not heard before.

'The Fed acted as lender of last resort to the world, offering foreigners $1trn of liquidity.

[other sources say total swaps were more like $ 11 trn]   Since then, offshore dollar debts have roughly doubled. In the next crisis, America’s political system is unlikely to let the Fed act as the backstop to this vast system, even after Donald Trump leaves the White House.'

This is a truly scary remark.

Comments welcome. Contact Henry here.



Who is Henry

 Henry Then...

"Henry Thornton (1760-1815) was a banker, M.P., philanthropist, and a leading figure in the influential group of Evangelicals that was known as the Clapham set. His 'Enquiry into the Nature and Effects of the Paper Credit of Great Britain (1802)' is an amazing performance. "...it anticipates in some points the analytic developments of a century to come. No other performance of the period will bear comparison with it, though several, among them Ricardo's, met with much greater success at the time as well as later... He was one of those men who see things clearly and who express with unassuming simplicity what they see."

This is the judgment of Joseph Schumpeter, one of the twentieth century's finest economists, in his monumental 'History of Economic Analysis', Allen and Unwin, 1954, p.689.


Henry Now...


Henry Thornton is the nom de plume of a prominent economist. Like his predecessor the modern Henry Thornton has been a banker and an advisor to M.P.s although he is not a politician himself. He is no evangelist but is keenly interested in a wide range of economic, social and political issues... 

Never Miss a Post. 
Subscribe Now!

Subscribe to Henry Thornton and be alerted the next time Henry shares some pearls of wisdom.

Please reload

Last Posts
Please reload