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June 18, 2016

We travelled to Naples by train from Rome. 

We navigated the usual scrum to get on to the train with luggage, stow it and find our seats. The train from Rome was genuinely fast and we wondered again why a rich nation like Australia has no fast trains. The taxi ride to o...

June 5, 2016

A reader has commented on the first report of Henry’s 2016 liason expedition. ‘We too noted incredible civility and politeness on our trip – not only in the hotels but also on the street, with folk actually taking us to where we wanted to go. I think web pages such as...

May 27, 2016

A reader has commented on the first report of Henry’s 2016 liason expedition. ‘We too noted incredible civility and politeness on our trip – not only in the hotels but also on the street, with folk actually taking us to where we wanted to go. I think web pages such as...

May 18, 2016

Henry and Mrs T embark on the greatest 'liaison trip' of all time. First stop New York in the spring.

'Spring revival' says the Wall Street Journal. Yes I know we could read this in Melbourne, but we'd be diverted by the political shenanigans in our very own Banana Repu...

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...

Abstract.


This paper shows that in modern USA history asset (share price) inflation mostly responds to changes in monetary policy in the same direction as goods inflation. However, in certain important episodes, asset inflation booms while monetary policy is well contr...

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...

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NEWS + VIEWS

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.

 

Henry.Thornton@henrythornton.com

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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