As I finished reading David Graeber’s book ‘Debt’ this morning, I heard that the Nobel prize in economics has been awarded to three economists. Their contribution to economics seems to be this: “If you want to stabilize the financial system, and ensure that it continues as it is, you must support banks in times of crisis”. This argument is backed by plenty of mathematics and reading of tea-leaves.
I am relieved. For a minute I thought that the Prize Winners may suggest that it was important to support people who have been fleeced by banks, or maybe even to declare an amnesty on debt.
But no. It has now been scientifically proven – based, no doubt, on models that hypothesize the need for a banking system similar to the one we already have – that in a crisis it is important to support banks so that the system remains stable.
“The fact that the group of experts whose job it is to make sense of the direction of the economy were more or less blinded by their assumptions about how that reality works, is a sobering result” .
(Fligstein et al., 2014, p.46)
Indeed.
We can rest easy in the certainty that society – and its banks – are in good hands.
P.S. Ben Bernanke, who is one of the three prize winning economists, was chair of the Federal Reserve bank from 2006 to 2014.
Richard Shearmur 