© 2019 by Henry Thornton. 

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December 16, 2018

A difficult year is rapidly coming to an end. The Australian Treasury and central bank remain cheerful, especially in public comment and (presumably) advice to government. House prices are falling and look set to fall further. Wages are still showing little growth in r...

December 8, 2018

Government debt is still rising, though the Morrison government's promise of a surplus budget - at last - provides some comfort. State budgets will be in deficit until infrastructure development catches up with massive population growth. Banks are tightening credit whi...

November 17, 2018

Finally, the housing boosters are confronted by realists who say this should be a big downturn.  Also, Henry's lonely position on monetary policy has been supported by none other than Warwick McKibbin, former RBA board member.  And RBA chief Dr Philip Lowe, who said it...

November 10, 2018

'The insurgents  were crazy' the latest former PM said on ABC TV. 'Look at all my achievements - a strongly growing economy, etc, etc.

I forgot to write the list down, but the strong economy is due to excessive fiscal stimulus at the time of the GFC, when the Head of Tr...

November 3, 2018

The coming week includes the one hundredth anniversary of the end of the Great War. Henry is attending several events where distinguished Australians speak on the subject.  The discussion usually includes the basis of the famous poem, the forth verse of which was later...

October 20, 2018

'The next recession' is the theme of the latest Economist magazine. Today I provide a lean summary but I strongly recommend readers work through the entire supplement. My article last week, written before the Economist arrived, more briefly makes some of the same key p...

October 13, 2018

One of the best forums for discussion of economic policy in Australia is the Economic Outlook conference jointly run by The Oz newspaper and the Melbourne Institute.  Paul Kelly, Editor-at-Large of the Oz always presents a fine overview of issues. Sadly, however, globa...

September 26, 2018

Gender inequality in the news again, 28/9

Gender inequality in the news again, recently on Credlin, today in the OZ, presented in both places by John Slater of the Menzies Research Centre.

'What might McManus make of an industry where top ranking executives are paid in e...

September 8, 2018

Annual rate of growth of over 3 per cent cheers the cockle of the hearts of Australian economists, those who have hearts that is. Result was largely due to strong consumption growth, and most people missed the fact that this growth was accompanied by another fall in ho...

August 26, 2018

Australia has been called a gold medal coupist country.  At least no blood has been spilled as in countries where traditional coups are conducted.  Bruised egos certainly, but in my view a necessary changing of the 'Liberal' guard.  Scomo as PM and my one-time politica...

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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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