© 2019 by Henry Thornton. 

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July 18, 2018

Britain’s Theresa May is in the fight of her life to produce a solution to Britain’s departure from the Europe.  Always a bit odd for Mrs May to be leading this push as she was a was a ‘remainer’, as  were most of Britain’s urban ‘elite’. Mrs May is angling for a ‘ligh...

June 29, 2018

2000 economists, 345 sessions, each with 3 or 4 papers. Hog heaven for economists. In Vancouver, a mere 13 hours flying hours from Rome, with an hour sitting in the plane, ‘awaiting clearance’ and several hours in the ‘Maple Leaf’ lounge in Montreal.  The first leg of...

March 31, 2018

Massive market volatility surely marks a turning point in market sentiment.  It is worth listing the facts which make investors nervous.  The main fact is that markets have been strong for a long time and have reached a point where some downturn was required.  'It's ti...

March 25, 2018

Finally someone in public life has stated an important truth. On Insiders today, Gerard Henderson said, as an apparent side issue, something like: 'The only way wages can go up is for productivity to increase'. Barry the boss failed to pick up the point but it is one t...

January 27, 2018

In every asset boom most people expect it to go on forever because 'this time it's different'. In every occasion of asset boom like we have been enjoying, correction is inevitable and mostly painful.  Yet not all the signals are consistent.

US stocks run on, and US econ...

January 20, 2018

Finally, instead of the usual 'she'll be right, cobbers', someone who should know warns that Australian house and land business might be catastrophic. The Oz reports: 'An Australian property developer who turned his back on the local market because he saw it as too ris...

January 14, 2018

House prices in Australia have stabilised, on some measures falling, certainly soggy on Australia's East and South-east coasts. Mrs T is watching in Melbourne prices closely and can quote examples of houses that fail to sell at auction, then get listed at still high pr...

January 1, 2018

We wish you a happy and interesting 2018, gentle readers. What will happen this year? Will the global economy continue its halting recovery, the US part stimulated by President Trump's tax cuts? Will China's looming debt crisis get worse? Will the UK's Brexit create ec...

December 2, 2017

Why Australia Prospered: The Shifting Sources of Economic Growth
by Ian W. McLean, Princeton University Press, 2012, 304 pages, US$35

Australia achieved the highest global income per capita a few decades after European settlement. The top position was lost around 1900,...

December 2, 2017

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 successful nations.


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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... 

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