The credit crisis came at the weakest possible moment of the American political cycle, the last period of an outgoing Presidency. The first serious sign that subprime mortgages were toxic came in the middle of 2007, approximately six months before the start of the 2008 primaries. The first crisis came in August 2007. When the President put the Paulson Bill to Congress, his authority was at its lowest, and he initially failed to persuade Congress to pass the Bill…
October 9th, 2008 | William Rees-Mogg | 1 comment | ContinuedArchive for William Rees-Mogg
Leading political editor William Rees-Mogg is former editor-in-chief for The Times and a member of the House of Lords. He has been credited with accurately forecasting glasnost and the fall of the Berlin Wall – as well as the 1987 crash. His political commentary appears in The Times every Monday. His financial insights can only be found in the Fleet Street Letter, the UK's longest-running investment newsletter.
Business Cycle Theory Explained by Joseph Schumpeter
Schumpeter is important because he developed a theory of business cycles which puts its emphasis on industrial innovations rather than banking. Most business cycle theories put their emphasis the other way, and are essentially monetary. Maynard Keynes is just as much a monetary economist as Milton Friedman when he comes to his explanation of business cycles. This is surely an argument which is going to be reopened…
October 2nd, 2008 | William Rees-Mogg | 1 comment | Continued
The Glass-Steagall Act Kept Banks in Order Until 1990
In 1933, the United States passed the Glass-Steagall Act, which prohibited commercial banks from dealing in investments, and prohibited investment banks from doing commercial banking activities. This was a very sensible measure, and kept the banks in reasonable order until 1990. Unfortunately, in 1990, this Act was repealed – for reasons best known to the psychiatrists of the legislators…
September 25th, 2008 | William Rees-Mogg | 5 comments | Continued
The Collapse of the U.S. Housing Market and Mortgage Bubble
The collapse of the U.S. housing and mortgage bubble has proved much more worrying and has already destroyed the independence of Bear Stearns, Merrill Lynch, A.I.G., Lehman Bros, Fannie Mae, Freddie Mac, and, in London, Northern Rock and HBOS, with various levels of loss for the shareholders. When we were writing “Blood in the Streets”, we did foresee the significance of the housing market.
September 19th, 2008 | William Rees-Mogg | 0 comments | Continued
Irving Fisher Remains Immensely Important in the History of Economic Thought
In February 1946, when they were both old men, Joseph Schumpeter wrote a letter to Irving Fisher explaining why he could not accept a plan on a proposed committee on monetary policy…
September 11th, 2008 | William Rees-Mogg | 0 comments | Continued
Discussing the Scale of the Global Economic Crisis
There is much discussion of the scale of the global economic crisis. Some people expect it to cause a crisis comparable to the Great Slump a wiping out of capital values, a liquidation of global debt. We cannot yet be sure, but we can see that the main factors of global economic development are all in difficulty. On the one hand…
August 1st, 2008 | William Rees-Mogg | 1 comment | Continued
There Are Two Ways of Studying Economic Theory
The events of 2007 and 2008 have shown the limitations of the mathematical method. The credit crunch was not foreseen by anyone that I read, but it came as a shock to the number-crunchers – it took them completely by surprise. It did not come as a shock to the economic historians, who happily settled down to discuss the resemblances between this credit crisis and earlier ones…
July 18th, 2008 | William Rees-Mogg | 9 comments | Continued
Recessions Can be Short, Medium, Long, Mild, Medium or Severe
It is already clear that this is not going to be a short and mild recession, but we cannot yet be sure – for lack of evidence – whether it will be medium or long and severe. Of course, it will not take the same form in different countries. As in the California fire, some districts will largely be spared but others will suffer square miles of conflagration…
July 10th, 2008 | William Rees-Mogg | 0 comments | Continued
Barack Obama is a Strong Favourite to Win the Presidency
On the whole, I have a better record of forecasting American elections than British. Distance makes one see the developments more clearly. I certainly can claim to be one of the early birds in detecting the strength of the movement towards Barack Obama. I am not sure that those early forecasts are of any importance except to the columnist himself, but they do reassure the writer that he, or she, is in touch with some sort of political reality.
June 5th, 2008 | William Rees-Mogg | 13 comments | Continued
U.S. Presidential Election
I am in the somewhat unusual position of having a potential right to a vote in the U.S. Presidential election which I have not taken up. In 1934, as a move towards gender equality, President Roosevelt gave American women the right to retain their citizenship if they married a foreigner. My mother had married an Englishman in 1920, had forfeited her citizenship and was in due course able to regain it.
May 30th, 2008 | William Rees-Mogg | 5 comments | Continued