There are now some States who want to let the financial markets off by themselves

At this point in the global fight against depression, the measures taken by central banks, public and Governments treasures appear very conservative. Almost everything which has been - increase in spending, lower taxes, recapitalization of banks, purchase of assets at risk, operations in the markets and measures to increase liquidity - corresponds to a policy almost two centuries, at the beginning of the industrial revolution.

The story begins in 1825, when panic investors prefer to keep their assets in cash rather than safe in companies at risk. Robert Jenkinson, Minister of the Treasury of George IV, asked the Governor of the Bank of England to take measures to prevent the collapse of the value of financial assets. "We believe in the market economy, he said, but not when the price of a market economy cause mass unemployment in the streets of London, Bristol, Liverpool and Manchester."The Bank of England reacts by announcing its intention to stabilise the market and putting warning speculators. She buys bonds, which grows upward the prices of financial assets and increases the available liquidity, and it lends money to banks in difficulty.

Since then, whenever a Government has left financial markets out by themselves (in 1873 and), the situation has gone wrong. When he intervened directly or via a private bank to support the markets, the result has been beneficial. Thus, then panics of 1893 and 1907 in the United States, the State authorized JP Morgan to behave as a Central Bank. In the 1990s, he established the Resolution Trust Corporation (RTC) to take over the assets of bankrupt American banks, intervened with the IMF to help the Mexico and the economies of East Asia. There are now some States who want to let the financial markets off by themselves. This would be a radical change.

Administration Obama, some central banks and financial authorities across the world Act therefore way very curator, even if they adopt spending programs that dig the deficit, boost the volume of government bonds, guarantee private risk debts and redeem industrial companies. They are the best they can and, if I were in their place, I would no doubt more mistakes they different, but surely more serious errors. Nevertheless, I have a question. During this crisis, the US State as well as others to interfered vigorously in the industrial and financial policy. They did without creating institutions such as the Reconstruction Finance Corporation in the 1930s and the RTC in the 1990s, which these unusual State actions quite happened, without too much corruption or situation of annuity research. The discretion policy makers were flanged by new interventionist institutions created by the legislature.

Therefore, several founding fathers of America, such as James Madison and Alexander Hamilton felt that things had to be. They were suspicious of the Executive power and believed that the power of the President should be less than that of the various Kings George of the time. This time, why Congress did not follow the RFC and the RTC model when he endorsed Bush and Obama financial and industrial measures Why it gave a more important role in the existing financial institutions like the IMF Finally, how to rebuild the momentum the international financial institutions to make them more efficient