Douglas Carswell's Blog

Recommended read: Slow Finance by Gervais Williams

A couple of weeks back, I asked the Chancellor if any of his Treasury team had read Adam Smith’s Wealth of Nations.  Perhaps I should instead have asked if they have read Gervais Williams’ Slow Finance. 

They should – and so should you. Click here to buy. 

Although I’ve only read the first few chapters, it seems to me to be a must read for anyone concerned about the financial mess that we are in.

For a quarter of a century before the credit crunch, the world experienced a massive credit bubble. Williams, himself a fund manager, points out the “sugar rush effect” this had on the financial sector. Asset prices, such as house prices rose.

With all that candy floss credit around, one person’s savings seemed to become detached from another person’s investment. Frothy financial instruments, supposedly there to spread risk, in fact made it difficult for people to see it. 

Many banks no longer stuck to that boring business of only lending on against what retail depositors deposited. Instead they lent lashings of the candy floss credit from the wholesale market.

Until one day it dried up. Crunch.

As Williams says “no one wants the safety of the savings held in commercial banks to be in question”. But armed with the pretext of saving the financial system, have central banks actually done the right thing since 2008?

As I never tire of pointing out, central bankers in Britain and America seem to have given the patient more of what made it ill. More credit has been pumped into the system. Far from reconnecting one person’s savings with another’s investment, in providing more liquidity to zombie banks, the financial sector has become ever more detached from the real world. 

I will blog more about the book as I make my way through it. 

In my experience, public officials rarely do the right thing because they see the light. Instead they clutch about for an answer once they begin to feel the heat. Hopefully some of them might read this book before that day arrives.

UPDATE:  Since I posted this blog, I'm delighted to see that sales of Slow Finance have shot up the Amazon rankings by over 20,000 places for hardback copies and about 30,000 for the kindle version.  Do post your thoughts as you make your way through it ...

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