TCC Senior Fellow Professor Kevin Dowd recently gave a brilliant and must watch talk at the Adam Smith Institute. Very kind with his remarks about the work of TCC, you can watch the whole thing here.
On the evening of Monday 12th September 2011, TCC Senior Fellow, Professor Kevin Dowd, is giving a talk called ‘The Decapitalization of the West’ hosted by the Adam Smith Institute. Co-author – with Martin Hutchinson – of the recent book, ‘The Alchemists of Loss: How Modern Finance and Government Intervention Crashed the Financial System’, Dowd is one of the world’s best scholars when it comes to free-banking and laissez-faire financial and monetary systems.
Make sure you do not miss this event. For all the relevant details visit this page here and then RSVP via: events@adamsmith.org
Ultimately, the problem with modern banks is that they do not operate in a free market. They haven’t done for decades. Deposit insurance means depositors take no interest in the stability of the banks they give their money to. The inevitability of bailouts means bondholders and shareholders take no interest either. Expansionary monetary policy encourages banks to lend too much and reserve too little. Accounting regulations encourage all banks to invest in certain asset classes, ensuring that when problems emerge, they are likely to be systemic. All of these things are government interventions, and all of them make the financial sector more risky and less stable.
The Adam Smith Institute has recently published videos of their Liberty Lectures, held at Cass Business School last August. The room was overflowing with bright and inquisitive students, treated to a medley of talks. My own was called “Banking, Inflation and Recessions” and can be viewed here.
There is a plausible free market argument to say that under certain institutional conditions (such as competitive banks and no moral hazard), increases in the money supply to offset changes in the demand for money would avoid adjustments having to take place through the notoriously ‘sticky’ real economy. In the same way that inflation creates real effects, so does a monetary deflation, and these effects are neither desirable nor necessary. However, whether this theoretical possibility can be acted upon is another matter. Even if central bankers had the benevolence to try to replicate markets, they most certainly do not possess the omniscience. Expecting such economists to comment on the ‘appropriate’ level of monetary expansion misunderstands the whole point.
Following his introduction to Mises, Dr Eamonn Butler has released his latest book, Austrian Economics – A Primer. I recommend it strongly if you want to grasp the fundamentals of the Austrian School of Economics as quickly as possible: at just 118 pages, this pamphlet can be tackled in one sitting.
With Keynesian-inspired policies which ‘spend your way out of recession’ clearly not working, the Austrian School provides a better explanation for recent events than more ‘mainstream’ thinking, whether Keynesian or Monetarist.
Over the course of the book, Eamonn explains the Austrian view of the importance of human agency, values and knowledge in shaping the markets, that is social cooperation. Vitally, it explains the origin of the present cycle of boom and bust: the government’s cheap credit policies, which encouraged people to borrow and discouraged saving, creating an artificial boom that inevitably ended.
For many years, the Austrian School of Economics has been sidelined, but it’s great to see that it is now rising in popularity as people become increasingly critical of the way governments and central banks have handled the economy.
Butler’s systematic and simple yet comprehensive primer is a great addition to a stable which also includes The Austrian School: Market Order and Entrepreneurial Creativity by Jesus Huerta de Soto. While Huerta de Soto’s first-class book is perhaps aimed at a more technical audience, Butler has made the Austrian School highly approachable. A strength shared by both works is to be measured and inclusive where “Austrians” can be confrontational.
Eamonn has made a superb job of outlining this important school of thought and his book should prove a great success. You can buy it here.
President of the Adam Smith Institute Madsen Pirie says, “It is no time to be squeamish”:
The Government is trying to pitch the debate as one between cuddly and sensible economies from Labour, versus Tories “salivating about wielding the axe”. The debate has changed, however, in that the public now expects cuts and even supports them. Moreover, they trust the Tories to better implement them.
They are correct. Several studies have identified savings to be made without cutting essential services. The James report identified £35bn, the Taxpayers’ Alliance and Institute of Directors report pointed to £50bn, and the European Central Bank has said that Britain could save £96bn if its public services could operate with the efficiency achieved in the US, Australia and Japan – and without reducing actual services.
