City AM

Reply to my ranting email:

"
I doubt we’ll ever agree. But my point – as I have often argued — is that following in the line of many economists over the years, I believe that the main drivers of booms, bubbles and busts is inadequate monetary policy i.e bad decision from central banks. I don’t think commercial banks are generally anything other than the conduits for these errors. When excess liquidity floods the markets, private agents and investors become drunk and take stupid decisions. It has happened time and again — in this case, what mainly went wrong was a massive global bet on the property market. There was also a secondary reason for the crisis: an intellectual error which meant that most valuation models were wrong. These points fed off each other, in my view.

You are obviously entitled to disagree, to think this is all nonsense and that I reflect the view of vested interests (I don’t: I hate bailouts and would rather that AIG, for example, not be bailed out). But you should then present an alternative theory of the way the world works and refute my explanation. I’d also be keen to understand exactly how Goldman Sachs (for example) helped cause the recession. I don’t think they did in any meaningful way.

Best wishes

Allister"