The End of Alchemy by Mervyn King
Mervyn King, governor of the Bank of England from 2003 to 2013, has long been “at the heart” of Britain’s financial establishment, said Liam Halligan in The Daily Telegraph. Yet his new book “is a fearlessly honest explanation of the 2007-08 financial collapse”, providing “disturbing insights” into what he calls “the worst banking crisis the industrialised world has ever seen”. Despite its catastrophic effects, he writes, “nothing much has really changed” in the basics of the banking industry; and he thinks that without reform “another crisis is certain… sooner rather than later”. Part memoir, part manifesto, The End of Alchemygives “a genuine insider’s account” of the crisis, and proposes a blueprint for extensive reforms. “This is a most significant book – one that, I believe, will be read years from now.”
“The depth of King’s thinking is impressive,” said Ben Chu in The Independent, and he makes a “powerful case” for demanding change. However, the reforms themselves “feel rather undercooked”. Retail banks should, he says, be made safe and “narrow”, holding liquid reserves equal to customer deposits. The risky financial wizardry would be left to “wide” banks, which would not take deposits, funding themselves through debt and equity. Central banks would be what he calls “pawnbrokers for all seasons”, there to provide insurance when problems hit. “There are two problems with these proposals,” said David Smith in The Sunday Times. “One is that they are not going to happen.” The other is that they would cause stagnation and severely impede capitalism. Maybe, said John Plender in the FT. But even those who don’t agree with his recommendations would have to concede that this is an “outstandingly lucid account” of “the dilemmas we face”. King “is entitled to say that we have been warned”.