© 2019 by Henry Thornton. 

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November 20, 2017

This is a complicated exposition of Macro and Micro Prudential policy. Its relevance is attested by two stunning graphs. As Haldene says: ' On cost grounds alone, a systematic rethink and reform of regulatory standards has been fully justified. While the costs of the g...

November 12, 2017

This post aims to provide a guide to modern macroeconomic analysis. It is a time of uncertainty, and the profession is groping for better, or at least clearer, answers.

The earliest of these offerings, Economics in unchartered waters? In September 2016, provides a summa...

November 10, 2017

There have been many strong recent influences on our perspectives of fiscal policy. These include a largely negative experience with fiscal rules, the growing challenge of fiscal sustainability in economies with aging populations, a declining excitement about the possi...

November 8, 2017

The world economy is 'in the red zone', 'navigating in dangerous waters', 'completely stuffed' and a variety of other colorful and depressing descriptions. As the opening sentence of my book Great Crises of Capitalism asserts, the world may still experience a depressio...

November 4, 2017

Gor blimey, comrades. signs of progress in economics.

A good friend has just attended a meeting of the great men and women of Macroeconomics. He kindly sent me the program, which thoughtfully has link to papers, presentations and discussions.

Today I present material fro...

August 27, 2017

Serious progress in important matters this week. Peter Costello has pointed out that interest rates were reduced to a level that created the current housing boom. Four Corners focussed on the current status of the housing market and experts pointed out that many people...

July 16, 2017

The best account of the rise and fall of asset prices is by Hyman Minsky. His 'financial instability hypothesis'  is the best way to understand why modern economies have self-contained booms and busts. In modern economies, an often long period of 'Tranquility' with sou...

July 6, 2017

Boardrooms believe they have mastered the “Theory of Everything.”

Margaret Court makes a fair point. Alan Joyce is using Qantas as a corporate “bully pulpit” from which to propagate – and to elicit consent to – a biological falsehood: the notion that two men (or two wom...

June 4, 2017

Manchester, now London X3, it's hotting up dear readers. We offer our deepest sympathy for their troubles ...

President Trump has decided to walk away from the Paris accord on climate change, despite the commitments not being binding and simple enough that even Australi...

May 27, 2017

This is a global issue. For decades new workers have entered global labor markets, in China, India, South East Asia and other developing nations. In developed nations, this already brings competitive pressures on developed nation workers. Slow growth since the Global F...

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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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