© 2019 by Henry Thornton. 

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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...

July 1, 2008

Welcome to the new financial year!

The Bank for International Settlements (BIS) is probably the world's leading authority on global economic trends.

Its degree of courageous dispassion no doubt comes from a comfortable existence in Basel and its long tradition as the cen...

October 2, 2007

Growth of debt has surged in developed nations in the past 30 years.  Now similar growth is occurring throughout the developing world, especially the leading new developers including China, India, Russia and Brazil.

As previously reported, in recent years growth of glob...

House prices have soared, share prices have rocketed, resource company shares have glowed in the dark, but consumer prices are subdued.  The graph shows the extent of the dislocation between asset inflation and consumer inflation in Australian markets.

Take a moment to...

' “Too little, too late”.  That, surely, is the verdict on Ian Macfarlane’s Reserve.  Inflation globally

is on the rise and global inflation is set to rise further. 

The the big challenge for Governor Stevens will be to confront and subdue Australia’s current infla...

"Bubble, bubble, toil and trouble for the RBA Board and for borrowers."

 Bubble, bubble, toil and trouble .

.Today’s Reserve Bank Board meeting will be the most momentous since late 2003. The Board confronts scenarios that could substantially discredit government policie...

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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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