– We have in fact not done very much to avoid future crises. History shows that the more frequent and more powerful. The greatest fear must be that it again comes a depression that is so large that the economic and political system can not handle it, says John Kay told Aftenposten.
yesterday held academic, associated with Oxford and London School of Economics lecture at Norges Bank’s annual conference on financial research.
Servers, not men
Kay, including an advisor to the Oil Fund, believes it is possible to create a more stable economic system, but it requires a major overhaul of the financial sector.
– Banks shall be servants of the economy, not men. There is something fundamentally wrong with the financial system, says Kay, who has written several books on economics and has a regular column in the Financial Times.
He believes banks primary tasks is to nurture the payment, help people with savings, manage risk and allocate capital where it is needed.
– Now use an astonishing amount of resources on internal trades with other banks. We must ask ourselves whether this serves the real economy in any great degree.
Acceptance of greed
Kay believes that an increasingly complex banking sector and a growing acceptance throughout the 80s and 90s that greed is an essential part of capitalism, has contributed to a more unstable world economy.
– To let people be as greedy as possible, has very little to do with capitalism. The market economy is unbeatable because of other things, such as that there is a chaotic, free and continuous flow experiments.
Most of the “experiments” will not succeed, but some have success and help drive forward.
– It was not primarily greed that made that Bill Gates developed Microsoft says Kay.
For brief thoughts
in 2012 he made a report to the British government that came with suggestions for how the country could reform the banking sector.
Kay advocates to return to a simpler banking system with less regulation and fewer middlemen.
– But time after the financial crisis instead been marked by even more extensive regulation. What we need is to break up the big finanskonglomeratene. The financial crisis acted as much that the banks were too complex to go bankrupt, as they were too big. Lehman Brothers was not doing something important and was not particularly large, but it was so closely intertwined with the financial system that the bankruptcy had major consequences.
The report criticizes Kay also finance industry for being too short-term thinking.
– Today traders follow their investments in seconds, and it’s easy to get caught in this. A major challenge for long-term investors Petroleum Fund is to break completely out of this mindset. It is difficult in a world where there is more and more focus on quarterly results and short-termism, says Kay told Aftenposten.