Monday 30 March
The G20 won't solve the financial crisis because it is blaming the wrong things and coming up with the wrong solutions, a leading financial think-tank says today (Monday 30 March). Writing for the Adam Smith Institute, senior financial analyst Miles Saltiel says that the crisis was not caused by the bonus culture or too little regulation, and is not going to be cured by more regulation or big economic stimulus packages.
Saltiel, of capital analysts Fourth Phoenix and with twenty years' experience in the financial sector, says that the popular 'causes' of the crash – over-complex financial products, bank deregulation, excessive risk-taking driven by large bonuses – don't stand up to scrutiny.
Instead, the blame should fall on inept monetary policy, political social engineering that forced the banks into risky mortgages, regulation that forced mergers and created banks too big to fail, and the failure of the Basel banking rules.
Director of the Adam Smith Institute, Dr Eamonn Butler, said: "Unless the politicians understand what really caused the crisis – and what didn't – they will be applying the wrong cures based on the wrong diagnosis. And that's going to make the world economy even sicker."
Click here to download a PDF of What Went Wrong? An Agenda for the G20