The End of Alchemy

The End of Alchemy

Money, Banking and the Future of the Global Economy

Book - 2016
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Something is wrong with our banking system. We all sense that, but Mervyn King knows it firsthand; his ten years at the helm of the Bank of England, including at the height of the financial crisis, revealed profound truths about the mechanisms of our capitalist society. In The End of Alchemy he offers us an essential work about the history and future of money and banking, the keys to modern finance.The Industrial Revolution built the foundation of our modern capitalist age. Yet the flowering of technological innovations during that dynamic period relied on the widespread adoption of two much older ideas: the creation of paper money and the invention of banks that issued credit. We take these systems for granted today, yet at their core both ideas were revolutionary and almost magical. Common paper became as precious as gold, and risky long-term loans were transformed into safe short-term bank deposits. As King argues, this is financial alchemy--the creation of extraordinary financial powers that defy reality and common sense. Faith in these powers has led to huge benefits; the liquidity they create has fueled economic growth for two centuries now. However, they have also produced an unending string of economic disasters, from hyperinflations to banking collapses to the recent global recession and current stagnation.How do we reconcile the potent strengths of these ideas with their inherent weaknesses? King draws on his unique experience to present fresh interpretations of these economic forces and to point the way forward for the global economy. His bold solutions cut through current overstuffed and needlessly complex legislation to provide a clear path to durable prosperity and the end of overreliance on the alchemy of our financial ancestors.
Publisher: New York : W.W. Norton & Company, [2016]
Edition: First edition
ISBN: 9780393247022
0393247023
Characteristics: xv,430 pages ; 25 cm

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wyenotgo
Jul 26, 2017

King does his best to render economics as something a lot better than the "dismal science". By illuminating the alchemy practiced by the banking sector, he comes close to succeeding. Here are two kinds of alchemy, one of which actually seems to work, while the other is purely a fraud. The late medieval alchemists sought to create gold out of base metal; clearly, they were pikers. But it's true that the banks do in fact create money -- not out of base metal but in fact out of nothing. However, in their endeavor to turn long term risky loans into currently liquid capital, they have been engaging in a fraud, one that has pushed the world economy to the brink of disaster, leaving John Q. Taxpayer to bail them out and foot the bill while they dance away to play their game another day. Clearly Brecht was right: "After all, what crime is it to rob a bank compared with the crime of creating one?!"
King's prescription for a fix of the system might or might not work; sadly, we will never find out because those who run the system like it the way it is. We will sooner or later see another liquidity crisis and the same players will survive to fight another day; and so it will continue ....

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dianembca
Jan 28, 2017

dianembca thinks this title is suitable for 18 years and over

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