Dear Sir, The prevailing view amongst the commentariat (reflected in the recent deliberations of the G20) that the financial crash of 2008 was caused by market failure is both wrong and dangerous. Government failure had a leading role in creating the conditions that led to the crash.Central banks created a monetary bubble that fed an asset price boom and distorted the pricing of risk. As such, no significant changes are needed to the regulatory environment surrounding hedge funds, short-selling, offshore banks, private equity or tax havens. A revolution in financial regulation is needed. The proposals of the G20 governments and the EU are wholly misconceived. Specific and targeted laws and regulations could restore market discipline. These should include: This should be reinforced with central bank action to ensure that: Yours faithfully, Dr James Alexander, Head of Equity Research, M&G; Prof Michael Beenstock, Professor of Economics, Hebrew University of Jerusalem; Prof Philip Booth, Professor of Insurance and Risk Management, Cass Business School; Dr Eamonn Butler, Director, Adam Smith Institute; Prof Tim Congdon, Founder, Lombard Street Research; Prof Laurence Copeland, Professor of Finance, Cardiff Business School; Prof Kevin Dowd, Professor of Financial Risk Management, Nottingham University Business School; Dr John Greenwood, Chief Economist, Invesco; Dr Samuel Gregg, Research Director, Acton Institute; Prof John Kay, St John’s College, Oxford; Prof David Llewellyn, Professor of Money and Banking, Loughborough University; Prof Alan Morrison, Professor of Finance, University of Oxford; Prof D R Myddelton, Emeritus Professor of Finance and Accounting, Cranfield University; Prof Geoffrey Wood, Professor of Economics, Cass Business School.Economists' letter spells out what went wrong
Tuesday, 12 May 2009
Posts
and it all comes down to the growth of broad money.......(must be) monitored(the last phrase).
Greenspan,King,Bernanke(in his book "inflation targeting") all refuted this.
How can we expect politicians to choose half intelligent economists; they are only interested in manipulating them to stay in power (like Brown)
Behind all this is the political dominance of the property-owning democracy idea: that the first object of government is to encourage home-ownership by ensuring that house prices always rise.
Both/all political parties in the Uk have been overtaken by this project and there is no political or economic opposition (except for a few Land Taxers).Not only have the proponents of this stupid notion wrecked the economy,they have also undermined democracy as it is easier to let house prices run ahead of the economy than provide jobs as old-fashioned,grown-up politicans used to do.The "system" has had it.The bankers have only done their political masters' bidding.
Excellent, at last a true analysis without spin or rhetoric.
When central banks warn of exuberence, asset bubbles, failure of markets to price risk and are unable act to avoid catastrophe then the political establishment has the regulatory system and economic controls set up incorrectly.
It is a failure of our UK democratic system that the commander in chief of the regulatory set up became PM without being elected and is still in place even after his errors have brought the country on the verge of economic ruin!
The shareholders of financial companies now expect to vote on the executive annually.
Let's have the same privilige for the UK's stakeholders, an annual vote on the UK's executive board, i.e. the ministers.
This will make thenm accounatable to the people rather than them selves!