Capitalism

No Way to Run an Economy: Why the System Failed and How to Put It Right

No Way to Run an Economy: Why the System Failed and How to Put It Right

Graham Turner

Language: English

Pages: 240

ISBN: 0745329764

Format: PDF / Kindle (mobi) / ePub


In The Credit Crunch, Graham Turner predicted that banks would be nationalised and interest rates would be reduced too slowly to halt the crisis. His predictions were correct. His new book, No Way to Run an Economy, is the essential guide to the turbulent times ahead.

Turner recommended radical measures, such as quantitative easing, in early 2008 but argues that action has been taken too late and been too timid to make a real difference. He dissects the policy mistakes of the last 12 months including Obama's doomed market-led response to the crisis and the obsession of central banks with the red herring of inflation.

There is no doubt the economy is still in serious trouble, but Turner shows that learning from the mistakes made so far can prevent a situation worse than that of the 1930s crisis.

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the second attempt by Congress, and stock markets rallied again. The respite was brief – $700 billion was a lot of money, but the losses faced by banks were huge too. Turner 01 chap01 34 11/8/09 10:43:06 FROM BEAR STEARNS TO RECESSION 35 And the US authorities had failed to arrest the slide in the housing market. Despite repeated injections of liquidity from the Federal Reserve, mortgage rates were not coming down. There had been no improvement in borrowing costs. Indeed, by late August the

spiral out of control in the first place. But through their inaction, they are also guilty of facilitating the worst economic contraction in the post-war era.5 5 4 3 2 1 0 –1 –2 –3 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 —— % Change year-on-year Figure 0.2 US Real GDP Source: Department of Commerce When the consequences of their malign neglect became apparent in February 2007, the central banks – and governments – dithered. They seemed unable to comprehend

Turner 01 chap01 181 181 $570.0 billion in Q1 2006, rose to $575.8 billion in Q2 2006, dropped again to $520.4 billion in Q3 2006 and $388.7 billion in Q4 2006. The figures for 2007 are $349.9 billion, $281.4 billion, –$231.2 billion and –$264.5 billion respectively in Q1, Q2, Q3 and Q4. For 2008, issuance was –$269.3 billion, –$346.5 billion, –$313.1 billion, –$353.5 billion over the four consecutive quarters. And in Q1 2009, issuance was –$332.0 billion. Source: Federal Reserve, FoF, BEA and

£2bn’, Independent, 7 November 2008. ‘Upmarket customers help boost sales at Asda’, Independent, 14 November 2008. ‘It is “cool to be frugal” at the checkout’, Financial Times, 12 December 2008. See Turner 01 chap01 182 11/8/09 10:43:48 NOTES 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 Turner 01 chap01 183 183 also ‘Recession-hit shoppers turn to car boot sales’, Financial Times, 16 May 2009. See ‘Business is booming at run-down stores’, Financial Times, 13 April

prescription. Ultimately, the failure of Turner 01 chap01 10 11/8/09 10:42:59 INTRODUCTION 11 policymakers to learn even some of the most basic lessons of the early 1930s is not the fault of individuals. Instead, it reflects deep-seated problems with the economic system. In chapter 7, we argue that the Obama administration may find it impossible to break out of the current debt trap without nationalising banks. Indeed, putting banks into the public realm would act as a ‘circuit breaker’,

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