Primary navigation:

QFINANCE Quick Links
QFINANCE Topics
QFINANCE Reference
Add the QFINANCE search widget to your website

Home > Macroeconomic Issues Viewpoints > Lessons From the 2008 Financial Crisis—Part II: Central Banks and Monetary Reform

Macroeconomic Issues Viewpoints

Lessons From the 2008 Financial Crisis—Part II: Central Banks and Monetary Reform

by Richard A. Werner

Background

Part I of this contribution discussed the causes of the financial crisis of 2008, and how any country can quickly end banking crises and post-crisis recessions, as well as how one can avoid the recurring banking crises in the first place. As was seen, the prescriptions are not difficult to implement. This raises the question of why such policies have not been implemented in most countries. I also pointed out that banking crises are predictable, as one only needs to monitor broad bank credit growth relative to nominal GDP growth. If the former exceeds the latter for several years, it is because banks are creating a lot of money for unsustainable financial speculation, which must result in stress in the banking system, asset price bubbles, and, if large enough, a banking crisis.

If the pattern of the recurring banking crises is so consistent, why have not more economists and central banks recognized this? In an earlier contribution I discussed why conventional economics has been incapable of recognizing the simple facts. See “Understanding and Forecasting the Credit Cycle” in this volume. Thus, it is to the topic of central bank behavior that we must now turn.

Back to Table of contents

Further reading

Books

  • Ryan-Collins, Josh, Tony Greenham, Richard Werner, and Andrew Jackson. Where Does Money Come From? A Guide to the UK Monetary System. London, UK: New Economics Foundation, 2011.
  • Werner, Richard A. Princes of the Yen: Japan’s Central Bankers and the Transformation of the Economy. Armonk, NY: M.E. Sharpe, 2003.
  • Werner, Richard A. The New Paradigm in Macroeconomics: Solving the Riddle of Japanese Macroeconomic Performance. Basingstoke, UK: Palgrave Macmillan, 2005.

Articles

  • Forder, James (1998a), Central bank independence - conceptual clarifications and interim assessment, Oxford Economic Papers, vol. 50, pp. 307-334.
  • Forder, James (1998b), The case for an independent European central bank: A reassessment of evidence and sources, European Journal of Political Economy, vol. 14, pp. 53-71
  • Forder, James (1999), Central bank independence: Reassessing the measurements, Journal of Economic Issues, vol. 33, no. 1, March, pp. 23-40
  • Forder, James (2000), Book Review: Central bank independence and credibility: is there a shred of evidence?, International Finance, vol. 3, no. 1, pp. 167-185
  • Forder, James (2002), Interests and “independence”: The European Central Bank and the theory of bureaucracy, International Review of Applied Economics, vol. 16, no. 1, pp. 51-69.
  • Lyonnet, Victor, and Richard A. Werner. “Lessons from the Bank of England on ‘quantitative easing’ and other ‘unconventional’ monetary policies.” Special issue on Banking and the Economy, International Review of Financial Analysis 25 (2012): 94–105.
  • Werner, Richard A. “Understanding and forecasting the credit cycle—Why the mainstream paradigm in economics and finance collapsed.” QFinance macroeconomic issues viewpoints, 2009. Online: http://tinyurl.com/8xsz9t6
  • Werner, Richard A. ‘Towards a Quantity Theory of Disaggregated Credit and International Capital Flows’, Paper presented at the Royal Economic Society Annual Conference, York, April 1993 and at the 5th Annual PACAP Conference on Pacific-Asian Capital Markets in Kuala Lumpur, June 1993, reviewed by The Economist on 19 June 1993 in the ‘Economics Focus’.
  • Werner, Richard A. ‘Towards a New Monetary Paradigm: A Quantity Theorem of Disaggregated Credit, with Evidence from Japan’, Kredit und Kapital, vol. 30, no. 2, July 1997, pp. 276-309.
  • Werner, Richard A. (2002), The Spectre of Central Bank Risk and its Implications for Investors, Tokyo: Profit Research Centre Ltd., presented at Hedge Funds World Japan 2002 on 3 December 2002
  • Werner, Richard A. (2003), Global Issues Affecting Hedge Fund Investing – What You Need to Know about Central Bank Risk, Tokyo: Profit Research Centre Ltd., presented at Hedge Funds World Zürich 2003 on 4 November 2003 at the Dolder Grand Hotel, Zürich
  • Werner, Richard A. (2004), Peeking inside the Black Box - and Benefitting from the Global Macro Style, Tokyo: Profit Research Centre Ltd., presented at Hedge Funds World 2004 on 30 March 2004 at the Grand Hyatt, New York
  • Werner, Richard A. “Economics as if banks mattered: A contribution based on the inductive methodology.” Special issue “Papers in Money, Macroeconomics and Finance,” The Manchester School 79: supplement s2 (2011): 25–35.
  • Werner, Richard A. “Towards a new research programme on ‘banking and the economy’—Implications of the quantity theory of credit for the prevention and resolution of banking and debt crises.” Special issue on Banking and the Economy, International Review of Financial Analysis 25 (2012): 1–17.
  • Werner, Richard A. “Towards a more stable and sustainable financial architecture—A discussion and application of the quantity theory of credit.” Kredit und Kapital 46:3 (2013): 357–387.

Back to top

Share this page

  • Facebook
  • Twitter
  • LinkedIn
  • Bookmark and Share