Aeron Davis
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The great financial crash and the great failed paradigm shift
A technocrats' tale
in Bankruptcy, bubbles and bailouts
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Chapter six focuses on the great financial crisis of 2007-08, when everything fell apart. The crash sucked in many countries, but the UK economy was hit particularly hard. The banking crisis revealed the larger problems of its Ponzi-scheme style economic model, built on growing private and public debt and reliant on an over-sized financial sector and fickle international investment. Although the Treasury was to appear the nation’s saviour, the institution was also culpable for helping shape and then shore up such an unbalanced and unstable economic system.

The key question that occupies the chapter is why no substantial paradigm shift followed. Whatever version of capitalism that had been operating in the UK was no longer working. Even the super-rich of Davos, OECD and IMF technocrats, and the Queen of England, could see that. Neoliberalism had hit its wall. Keynesians and other heterodox economists came out to cheer on the new economic revolution. And then … nothing. But for a raft of new banking regulation, arranged by mild-mannered technocrats, it was status quo as usual. Governments everywhere absorbed their failing banks, loaded up their debt, and flushed trillions in government-issue monopoly money (QE) around the failed Ponzi-scheme system.

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Bankruptcy, bubbles and bailouts

The inside history of the Treasury since 1976

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