Hardback
Money in the Great Recession
Did a Crash in Money Growth Cause the Global Slump?
9781784717827 Edward Elgar Publishing
No issue is more fundamental in contemporary macroeconomics than the causes of the recent Great Recession. The standard view is that the banks were to blame because they took on too much risk, ‘went bust’ and had to be bailed out by governments. But very few banks actually had losses in excess of their capital. The counter-argument presented in this stimulating new book is that the Great Recession was in fact caused by a collapse in the rate of change of the quantity of money. The book’s argument echoes that on the causes of the Great Depression made by Friedman and Schwartz in their classic book A Monetary History of the United States.
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Critical Acclaim
Contributors
Contents
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No issue is more fundamental in contemporary macroeconomics than identifying the causes of the recent Great Recession. The standard view is that the banks were to blame because they took on too much risk, ‘went bust’ and had to be bailed out by governments. However very few banks actually had losses in excess of their capital. The counter-argument presented in this stimulating new book is that the Great Recession was in fact caused by a collapse in the rate of change of the quantity of money. This was the result of a mistimed and inappropriate tightening of banks’ capital regulations, which had vicious deflationary consequences at just the wrong point in the business cycle. Central bankers and financial regulators made serious mistakes. The book’s argument echoes that on the causes of the Great Depression made by Milton Friedman and Anna Schwartz in their classic book A Monetary History of the United States.
Offering an alternative monetary explanation of the Great Recession, this book is essential reading for all economists working in macroeconomics and monetary economics. It will also appeal to those interested in the wider public policy debates arising from the crisis and its aftermath.
Offering an alternative monetary explanation of the Great Recession, this book is essential reading for all economists working in macroeconomics and monetary economics. It will also appeal to those interested in the wider public policy debates arising from the crisis and its aftermath.
Critical Acclaim
‘Congdon (a contributor as well as the editor) is well aware that according to the typical account of the GFC, the culprits are the irresponsible marketing of arcane permutations of mortgage instruments and reckless banks operating on razor-thin capital cushions — “the follies of free-market capitalism.” Money in the Great Recession presents a convincing alternative view.’
– Nick Ronalds, CFA, Enterprising Investor
‘The financial crisis: central bankers were the heroes, and bankers were the villains – right? Wrong, totally. To understand why, read this book, with contributions from many leading economists who study money and central banks. As Tim Congdon, the editor, points out, central bankers permitted much too fast a growth in the money supply in the run-up to the crisis. The banks had every incentive to extend too much credit. The same central bankers then allowed the money supply growth rate to crash when the crisis hit. During and after the crisis, they brought in Draconian regulations that damaged the recovery process by increasing the cost of credit creation, so sandbagging money supply growth. It is an inglorious tale. Central bankers are not godlike technocrats, but simply civil servants, whose behaviour needs to be understood in terms of flawed incentives: incentives that can generate terrible outcomes. They – like governments – need to be governed by rules that keep the economy on track without inflation.’
– Patrick Minford, Cardiff University, UK
‘Tim Congdon has brought together a thorough coverage of the analysis, by leading academic and market economists, of the causes of the recent Great Recession. The focus is the key roles that money and financial regulation played in the recession and continue to play in the weak recovery. This is an important book that policy-makers, economists and others should read.’
– Forrest Capie, Cass Business School, City University London, UK
– Nick Ronalds, CFA, Enterprising Investor
‘The financial crisis: central bankers were the heroes, and bankers were the villains – right? Wrong, totally. To understand why, read this book, with contributions from many leading economists who study money and central banks. As Tim Congdon, the editor, points out, central bankers permitted much too fast a growth in the money supply in the run-up to the crisis. The banks had every incentive to extend too much credit. The same central bankers then allowed the money supply growth rate to crash when the crisis hit. During and after the crisis, they brought in Draconian regulations that damaged the recovery process by increasing the cost of credit creation, so sandbagging money supply growth. It is an inglorious tale. Central bankers are not godlike technocrats, but simply civil servants, whose behaviour needs to be understood in terms of flawed incentives: incentives that can generate terrible outcomes. They – like governments – need to be governed by rules that keep the economy on track without inflation.’
– Patrick Minford, Cardiff University, UK
‘Tim Congdon has brought together a thorough coverage of the analysis, by leading academic and market economists, of the causes of the recent Great Recession. The focus is the key roles that money and financial regulation played in the recession and continue to play in the weak recovery. This is an important book that policy-makers, economists and others should read.’
– Forrest Capie, Cass Business School, City University London, UK
Contributors
Contributors: P. Booth, J.E. Castañeda, T. Congdon, C. Goodhart, S. Hanke, D. Laidler, A. Ridley, R. Skidelsky, R. Thomas
Contents
Contents:
PART I What were the causes of the Great Recession?
Preface to Part I
Tim Congdon
1. What were the causes of the Great Recession?: the mainstream approach vs. the monetary interpretation
Tim Congdon
2. The debate over ‘quantitative easing’ in the UK''s Great Recession and afterwards
Tim Congdon
3. UK broad money growth and nominal spending during the Great Recession: An analysis of the money creation process and the role of money demand
Ryland Thomas
4. Have central banks forgotten about money?: The case of the European Central Bank, 1999 – 2014
Juan E. Castañeda and Tim Congdon
PART II The financial system in the Great Recession: culprit or victim?
Preface to Part II
Tim Congdon
5. The impact of the New Regulatory Wisdom on banking, credit and money: good or bad?
Sir Adam Ridley
6. Why has monetary policy not worked as expected?: Some interactions between financial regulation, credit and money
Charles Goodhart
7. The Basle rules and the banking system: an American perspective
Steve Hanke
PART III How should the Great Recession be viewed in monetary thought and history?
Preface to Part III
Tim Congdon
8. Monetary policy, asset prices and financial institutions?
Philip Booth
9. How would Keynes have analysed the Great Recession of 2008 and 2009?
Robert Skidelsky
10. Why Friedman and Schwartz’s interpretation of the Great Depression still matters: reassessing the thesis of their 1963 Monetary History
David Laidler
Index
PART I What were the causes of the Great Recession?
Preface to Part I
Tim Congdon
1. What were the causes of the Great Recession?: the mainstream approach vs. the monetary interpretation
Tim Congdon
2. The debate over ‘quantitative easing’ in the UK''s Great Recession and afterwards
Tim Congdon
3. UK broad money growth and nominal spending during the Great Recession: An analysis of the money creation process and the role of money demand
Ryland Thomas
4. Have central banks forgotten about money?: The case of the European Central Bank, 1999 – 2014
Juan E. Castañeda and Tim Congdon
PART II The financial system in the Great Recession: culprit or victim?
Preface to Part II
Tim Congdon
5. The impact of the New Regulatory Wisdom on banking, credit and money: good or bad?
Sir Adam Ridley
6. Why has monetary policy not worked as expected?: Some interactions between financial regulation, credit and money
Charles Goodhart
7. The Basle rules and the banking system: an American perspective
Steve Hanke
PART III How should the Great Recession be viewed in monetary thought and history?
Preface to Part III
Tim Congdon
8. Monetary policy, asset prices and financial institutions?
Philip Booth
9. How would Keynes have analysed the Great Recession of 2008 and 2009?
Robert Skidelsky
10. Why Friedman and Schwartz’s interpretation of the Great Depression still matters: reassessing the thesis of their 1963 Monetary History
David Laidler
Index
