Irreverent Economics

FT reports on Goldman’s record today.  An early take on this was by Josiah Stamp, director of the Bank of England, in the 1920s.

“Banking was conceived in iniquity and was born in sin. The bankers own the earth. Take it away from them, but leave them the power to create money, and with the flick of the pen they will create enough deposits to buy it back again. However, take away from them the power to create money and all the great fortunes like mine will disappear and they ought to disappear, for this would be a happier and better world to live in. But, if you wish to remain the slaves of bankers and pay the cost of your own slavery, let them continue to create money.”

This is a quote from a former director of the Bank of England, Jeremiah Harman, from 1825, commenting on that year’s crisis. Bagehot (1873) quotes him.

“We lent  by every possible means and in modes we have never adopted before; we took in stock on security, we purchased Exchequer bills, we made advances on Exchequer bills, we not only discounted outright, but we made advances on the deposit of bills of exchange to an immense amount, in short, by every possible means consistent with the safety of the Bank… Seeing the dreadful state in which the public were, we rendered every assistance in our power.”

If the authorities were already doing this 185 years ago, why where they so reluctant to provide liquidity support early on in the crisis?