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Bagehot Had Credit-Crunch Answers 130 Years Ago
By Mark Gilbert
Oct. 4 (Bloomberg) -- Walter Bagehot, an economist and author writing in the 19th century, had the answers to the current credit crunch.
In 1866, the U.K. money markets were in turmoil. The collapse of a private bank called Overend & Co. threatened to destroy the fragile trust underpinning the credit system.
The parallels with today are powerful, as ripples from the crash in the U.S. subprime mortgage market threaten to swamp parts of the financial markets. Central banks are losing control of monetary policy, as short-term money-market rates jump and long-term bond yields develop immunity to policy changes. Their sovereignty is under fire, as the crisis forces them to be reactive rather than proactive.
So what would Bagehot, who edited the Economist newspaper from 1861 until 1877, make of the current crisis?
The following question-and-answer dialogue combines current questions with comments culled from his book ``Lombard Street,'' published in 1873; I reckon we have a lot to learn from a guy who died 130 years ago.
Link to full article:
http://www.bloomberg.com/apps/news?p...d=aK7I0w1FQa_M
By Mark Gilbert
Oct. 4 (Bloomberg) -- Walter Bagehot, an economist and author writing in the 19th century, had the answers to the current credit crunch.
In 1866, the U.K. money markets were in turmoil. The collapse of a private bank called Overend & Co. threatened to destroy the fragile trust underpinning the credit system.
The parallels with today are powerful, as ripples from the crash in the U.S. subprime mortgage market threaten to swamp parts of the financial markets. Central banks are losing control of monetary policy, as short-term money-market rates jump and long-term bond yields develop immunity to policy changes. Their sovereignty is under fire, as the crisis forces them to be reactive rather than proactive.
So what would Bagehot, who edited the Economist newspaper from 1861 until 1877, make of the current crisis?
The following question-and-answer dialogue combines current questions with comments culled from his book ``Lombard Street,'' published in 1873; I reckon we have a lot to learn from a guy who died 130 years ago.
Link to full article:
http://www.bloomberg.com/apps/news?p...d=aK7I0w1FQa_M
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