A New Chapter of Capitalism The idea that finance is an arm of the state is back

An aphorism of James Grant: “Progress is cumulative in science and engineering, but cyclical in finance.” 

History repeating itself: regulators creating a new crisis by trying to fight the last one; fearless free-market financiers suddenly discovering the virtues of state intervention; class warriors claiming capitalism is unfair, dead or both.

We must confront the reality that the rules of finance are going to change. 

The modern Federal Reserve was created after John Pierpont Morgan had to organize a last-ditch private-sector bailout of the economy in 1907, locking his fellow bankers into a room in his house at 219 Madison Avenue.

The Glass-Steagall regulations separating investment and commercial banks were introduced by Franklin Roosevelt in 1933, repealed by Bill Clinton in 1999,  partially reintroduced in the 2010 Dodd-Frank Act that  followed the 2008 Lehman Brothers meltdown.

Blaming everything on a sudden liquidity crunch lets SVB and Credit Suisse off the hook. Depositors only want their money back in a hurry when they don’t trust their bankers. 

All the clever clogs at the Californian bank seem to have focused their energy on the sexy business of lending to venture capitalists, rather than the boring trade of deciding where you can safely park your depositors’ cash.

 Buying long-term fixed-rate government bonds when you have short-term floating-rate liabilities is a very basic mismatch — so basic that everyone in finance assumed it could not happen again

Mervyn King, the governor of the Bank of England during the 2008 crisis, liked to point out that capitalist companies are global in life and national in death — always looking to their national governments to save them if things get difficult. 

Despite their reputation for being rootless cosmopolitans, the world’s banks will be only too happy to go with the mercantilist flow. As Adam Smith would be the first to point out, bankers were opportunists long before they were cosmopolitans.

Perhaps we will look back on these few weeks as the time when the era of free market truisms ended — and Western governments decided that finance was their territory. 

John Micklethwait and Adrian Wooldridge Bloomberg 22 mars 2023


Banking stands revealed as a part of the state masquerading as part of the private sector. “Chicago Plan”  

Martin Wolf FT 21 March 2023 


Gamla Mor Anna och bankernas affärsmodell


Sommaren 1991 hälsade jag på min gamle gode vän Sven Rydenfelt. Vi talade om fastighetskrisen som då startat på allvar, och den tanklösa överbelåningen.

Ja, det är ju märkligt att människor inte tänker på vad som hände 1907, sa Rydenfelt

Nils-Eric Sandberg, DN 1996-10-18



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