Publication of the week: Money in the Great Recession

6 July 2017

Tim Congdon (ed.), Money in the Great Recession: Did a Crash in Money Growth Cause the Global Slump? Buckingham Studies in Money, Banking and Central Banking (Cheltenham: Edward Elgar, 2017). 288 pp. ISBN: 978-1-78471-782-7.

In the book’s introduction and first chapter Tim Congdon proposes that the Great Recession can be explained by a large fall in the rate of growth of the quantity of money, broadly-defined, which reflected developments in the banking system. In particular, he suggests that the regulatory demand for higher capital/asset ratios from September 2008 caused banks to shrink their risk assets and so led to the destruction of money balances. While banks undoubtedly had problems of their own making, officialdom’s tightening of regulation was mistimed and inappropriate, and had “vicious deflationary consequences at just the wrong point in the business cycle”. The Great Recession could have been avoided if quantitative easing (to boost the quantity of money), rather than the increase in capital ratios, had been pursued earlier.

The book has contributions from nine authors (including Dr Juan Castañeda of Buckingham) and it is fair to say they do not all agree. The Institute of International Monetary Research will be holding a series of events over the next few years to discuss the monetary interpretation of the Great Recession.

Contents:

Tim Congdon, “What were the causes of the Great Recession? The mainstream approach vs. the monetary interpretation”
Tim Congdon, “The debate over ‘quantitative easing’ in the UK’s Great Recession and afterwards”
Ryland Thomas, “UK broad money growth and nominal spending during the Great Recession: an analysis of the money creation process and the role of money demand”
Juan E. Castañeda & Tim Congdon, “Have central banks forgotten about money? The case of the European Central Bank, 1999-2014”
Adam Ridley, “The impact of the New Regulatory Wisdom on banking, credit and money: good or bad?”
Charles Goodhart, “Why has monetary policy not worked as expected? Some interactions between financial regulation, credit and money”
Steve Hanke, “The Basel rules and the banking system: an American perspective”
Philip Booth, “Monetary policy, asset prices and financial institutions”
Robert Skidelsky, “How would Keynes have analysed the Great Recession of 2008 and 2009?”
David Laidler, “Why Friedman and Schwarts’z interpretation of the Great Depression still matters: reassessing the thesis of their 1963 Monetary History“