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Why Central Banking Needs A Total Rethink

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http://www.telegraph.co.uk/finance/comment/jeremy-warner/8773458/Why-central-banking-needs-a-total-rethink.html

Less well aired is the case for reform of an even higher form of financial aristocracy – central bankers. Arguably, their policies were as culpable in causing the crisis as the greed of financiers, yet remarkably they have managed largely to escape public opprobrium, or even much in the way of public scrutiny.

Unbelievably, there has been no published internal inquiry into the Bank of England's handling of the crisis, or indeed, any remorse expressed over the policies that led up to the credit crunch.

The same goes for most other central banks, which to the extent that they admit failings at all, tend to cite the lack of adequate tools for controlling the credit cycle and supervising markets.

Some of them, the Bank of England included, are now being given those tools, which though it might be the right thing to do, can be viewed as a faintly perverse reaction. It is quite unusual, to put it mildly, for failure to be rewarded with such an extreme increase in powers.

Having followed this crisis for years it's not often you see anything mainstream press that criticises our central bankers.

The worlds global central bankers failed and not one has been relieved of their position.

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Abolition is the only course that makes sense. You don't need central planning in money any more than you need it in Bread or shoelaces.

Sadly, I know that will never happen. So I will just try and profit best I can from the booms and bust they create; while trying not to worry myself too much about the harm they continue to inflict on peoples lives.

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:lol:

What an unexpected turn of event!

- Government shamelessly begs central bank to turn on the money spigot even more than it already does

- Central bank says no.

- Article undermining the central bank begin to appear in government party press

We're back to the gold old days of New Labour.

Edited by _w_

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The worlds global central bankers failed and not one has been relieved of their position.

I think that there a lot of problems surrounding central banking... but I don't think the problems are with the operational activities of the central banks, as such, but rather in the objectives set for them by government.

It's easy to try and blame the central banks - but after a little investigation I found, for the BoE, at least, the policies with which I disagreed were dictated to them by the treasury - which is directly controlled by the government of the day.

One thing I find interesting is how the central banks of the world seem to have acted in concert over the past 30+ years... taking broadly similar policies... in spite of these policies being dictated to them by disparate governments across the globe. I guess there are at least two possibilities - either the central banks hold such sway over government that they can effectively dictate what instruction they receive... or governments, globally, have similar aims when it comes to how central banks should be run.

Personally, I think monetary policy has had a far lesser influence than fiscal policy...

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The seminal book for me that exposed what the banks were up to and where it would inevitably lead was written by Peter Warburton and published in 1999.

The title: "Debt and Delusion – Central Bank Follies That Threaten Economic Disaster".

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The seminal book for me that exposed what the banks were up to and where it would inevitably lead was written by Peter Warburton and published in 1999.

The title: "Debt and Delusion – Central Bank Follies That Threaten Economic Disaster".

Jesus hardly cheap!

If it was cheap I might have bought it...

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Jesus hardly cheap!

If it was cheap I might have bought it...

Well, here's a bit of the blurb from the inside jacket. Remember this was written in 1999:

----

"Central banks' preoccupation with inflation has blinded them to the dangers of unbridled credit expansion outside the banking system. These widely respected institutions have ushered in a largely unregulated credit system in North America and Western Europe and have promoted many complex financial innovations, including a dramatic expansion in the use of derivatives. At the same time they have failed to grasp the significance of a vast increase in government debt. In helping governments to create the illusion of personal wealth and national prosperity, central banks have fostered the very conditions in which past financial crises have occurred."

----

I bought this book when it was first published and I'm not aware of anyone else who at that time had such a complete vision of the scale of the problem and its root causes. Of course the financial community hated it and it was disparaged as scaremongering nonsense. It quickly fell below the radar.

The only criticism you can really direct at Warburton is that he didn't believe the financial meltdown could be more than two or three years away. He didn't think the central banks would be so stupid as to go for yet another of round of credit expansion to stave off the day of reckoning.

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The seminal book for me that exposed what the banks were up to and where it would inevitably lead was written by Peter Warburton and published in 1999.

The title: "Debt and Delusion – Central Bank Follies That Threaten Economic Disaster".

Thanks for that. Is it worth buying it now that everything has pretty much come out in the open?

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Damn right about the remorse bit. King has never apologised for not leaning against the wind with interest rates in the face of the biggest housing bubble in history ,inflating 200% in ten years, in an otherwise stable inflationary environment.

Until King (and indeed Brown with his reckless spending crusade) show remorse, they should continue to be hung, drawn and quartered on forums like this. One thing for sure they will not escape a drubbing in the history books for destroying the UK economy. Their legacy will be found in hell.

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Damn right about the remorse bit. King has never apologised for not leaning against the wind with interest rates in the face of the biggest housing bubble in history ,inflating 200% in ten years, in an otherwise stable inflationary environment.

Until King (and indeed Brown with his reckless spending crusade) show remorse, they should continue to be hung, drawn and quartered on forums like this. One thing for sure they will not escape a drubbing in the history books for destroying the UK economy. Their legacy will be found in hell.

I'm sorry but look at the OP on this very thread. Even the Tories, who I think have respect for the bank, are beginning to use propaganda tactics to pressure the bank into inflating more despite 5% inflation.

Just imagine what it was with Brown who had no respect for the bank. It's possible that King tried to calm things down and was just told to shut up or else.

Edited by _w_

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Thanks for that. Is it worth buying it now that everything has pretty much come out in the open?

I would say no, _w_.

It's nice to have on your bookshelf as a collector's item, but I don't think there's so much in there that would be novel to most here now. We've all learned an enormous amount over the past decade and of course Warburton couldn't have analysed the more exotic instruments that accompanied the housing boom.

I don't think all of Warburton's proposals for solving the crisis would go down too well with everyone either. He takes the view that such a credit expansion results in a huge wealth transfer to the top strata of society, and debt forgiveness mechanisms are required in order to avoid dangerous social conflict. Therefore he advocates either conscious monetising of debt (including government debt) or mandatory debt forgiveness. He couples this with rigorous financial reform, including the removal of limited liability status for companies that do not offer a product or service for general sale. Financial speculation would remain legal, but firms known to engage in such activities would not have protection from creditors.

Actually, browsing the final chapter once more demonstrates another of Warburton's weaknesses (and I was just as guilty back in 1999): naivety. He didn't realise just how completely the political system had been captured by the financial community and therefore he didn't foresee taxpayers being fleeced to make good the losses of the perpetrators. In that sense I think his agenda for reform comes across as being somewhat unrealistic, and the way things are going I suspect we're only going to get a true resolution to this crisis when some bankers have literally been strung from lampposts (although I stress I'm not advocating this). If that happens then I think they only have themselves to blame.

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I would say no, _w_.

It's nice to have on your bookshelf as a collector's item, but I don't think there's so much in there that would be novel to most here now. We've all learned an enormous amount over the past decade and of course Warburton couldn't have analysed the more exotic instruments that accompanied the housing boom.

I don't think all of Warburton's proposals for solving the crisis would go down too well with everyone either. He takes the view that such a credit expansion results in a huge wealth transfer to the top strata of society, and debt forgiveness mechanisms are required in order to avoid dangerous social conflict. Therefore he advocates either conscious monetising of debt (including government debt) or mandatory debt forgiveness. He couples this with rigorous financial reform, including the removal of limited liability status for companies that do not offer a product or service for general sale. Financial speculation would remain legal, but firms known to engage in such activities would not have protection from creditors.

Actually, browsing the final chapter once more demonstrates another of Warburton's weaknesses (and I was just as guilty back in 1999): naivety. He didn't realise just how completely the political system had been captured by the financial community and therefore he didn't foresee taxpayers being fleeced to make good the losses of the perpetrators. In that sense I think his agenda for reform comes across as being somewhat unrealistic, and the way things are going I suspect we're only going to get a true resolution to this crisis when some bankers have literally been strung from lampposts (although I stress I'm not advocating this). If that happens then I think they only have themselves to blame.

Thanks for that, I'm always keen on good books but I try to avoid reading about things I already know.

It was so hard to imagine how captured the governments were that it would be hard to blame him.

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http://mises.org/daily/1579

Since the last serious outbreak of inflation in the 70s, central banks have conquered this pestilence and have practiced a responsible stewardship over national monetary systems ever since. Due in no small part to the benign inflationary environment that has followed their victory, stocks and bonds have outperformed historical averages. This reflects a high degree of confidence in future monetary stability and prosperity.

Or so we are constantly told.

That this consensus view is a twisted mirror of reality is the theme of an undeservedly obscure work of financial economics, Peter Warburton’s Debt and Delusion: Central Bank Follies that Threaten Economic Disaster. Published in 1999, the work rapidly went out of print but has since become a cult classic among financial contrarians.[1],[2] Although not written from an Austrian point of view, the argument parallels an Austrian view of money and banking in many aspects. My purpose in writing this article is to present Warburton’s main argument and to interpret it through an Austrian lens.

Found this at the Von Mises site.

August 11, 2004

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  • 284 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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