Jacques de Larosière has spent his entire career in the upper echelons of financial institutions: he was director of the International Monetary Fund (1978-1987), before becoming governor of the Banque de France (1987-1993), then president of the European Bank for Reconstruction and Development (1993-1998). He is advisor to the president of BNP-Paribas. He is also a member of the French Académie des sciences morales et politiques. He is the author of 50 Ans de crises financières [Fifty Years of Financial Crises] and Les Lames de fond se rapprochent.
“The banks are mainly responsible for the 2007-2008 crisis”; “Too big to fail”; “Low or negative interest rates favor investment, thus growth”; “You shouldn’t over-react to public debt”; and so forth…
In this short work, Jacques de Larosière analyzes the 10 commonly held beliefs – and the same number of preconceived ideas – that are quite simply leading us to disaster.
No, banks are not the only things responsible for the most serious crisis we’ve experienced in the recent past! Monetary laxity, notably that of the Fed and its president, Alan Greenspan, have played just as harmful a role. As for banks, by asserting that they could not go bankrupt or they would take down the entire financial system with them, they were encouraged to develop suicidal behavior.
Have we really learned any lessons from that crisis? asks Jacques de Larosière between the lines. Nothing could be less certain. The strength of preconceived notions is such that we are continuing to exhibit a relative tolerance for a debt that is, however, colossal. Or to accept, even encourage, an overabundance of liquidity in the financial system. Thus, this book is a cautionary tale: the old demons are still here, and the risk of an even more serious crisis is real.
- Each chapter explores a preconceived notion, its apparent logic, and its consequences, in order to dismantle it
- A very effective and instructive approach