The New Depression Reviewed In THE ECONOMIST | Richard Duncan
This week my book, The New Depression: The Breakdown Of The Paper Money Economy, was reviewed in the Buttonwood column of The Economist. Please find the review copied below.
Duncan dough notes
A thought-provoking analysis of the debt crisis
Jul 7th 2012 | from the print edition
FEW can claim to have predicted the scale of the financial meltdown of the past few years, but Richard Duncan, an economist with a career in finance, made a good attempt. His book “The Dollar Crisis”, published in 2002, argued that the post-Bretton Woods financial system had led to huge global imbalances and a credit bubble that would end in collapse.
Mr Duncan erred in thinking that the crisis would be prompted by a dollar implosion. But his analysis, again highlighted in his latest book, “The New Depression”*, still seems acute. Ending the Bretton Woods system of fixed exchange rates, and the dollar’s link to gold, enabled countries to finance persistent current-account deficits. This in turn sparked huge and occasionally destabilising flows of cross-border capital and a massive burst of credit creation. Total credit in the American economy passed $1 trillion in 1964; by 2007, it had exceeded $50 trillion.
This debt explosion showed up not in consumer prices but in asset prices, notably in property. The cycle was self-reinforcing: banks lent money to people to buy property, causing prices to rise, making banks more willing to lend, and so on.