I recently gave a talk about my research to the LSE’s Hayek Society. Our discussion ranged widely, inevitably majoring on the current economic climate. I suppose once the rather smug recriminations raining down through the media evaporate all we really want to know is: what next? What is the most effective and sustainable balance between private enterprise and public intervention, and how can we find it? Read More
So what went wrong? Liquidity. Why? Exposure to sub-prime assets through complex financial instruments designed to reduce risk made banks chary of lending to each other. The knock-on effect of this was a collapse in confidence, as signalled through stock market indices. Self-righteous hindsight bemoans capital adequacy – which might have increased liquidity – and the hubris that led to over confidence in secularisation. But schadenfreude won’t restore confidence. Read More
