The Nice – non-inflationary, consistently expansionary – decade has gone. The next decade is going to be nasty. It is time to start learning lessons. “Niceness” proved a mistake.
The UK economy has moved with brutal speed from what Andrew Haldane, the Bank of England’s new executive director for financial stability, in a brilliant paper*, calls “the golden decade” of steady growth and low volatility to its opposite. Stability has proved the economy’s nemesis, as Hyman Minsky predicted. Read more
By Charles W. Calomiris
Tim Geithner, US Treasury secretary, has his work cut out. Any successful plan to revive the financial system will have to raise banks’ asset and stock values, but helping banks is unpopular. Neither Republicans nor Democrats in Congress seem excited about spending money helping banks. And some in the Obama administration probably are counselling the president against taking the political risk of helping Wall Street. Many in the electorate are incensed by the idea of propping up banks and exposing taxpayers to risk of loss. Read more