Washington, Wall Street and the “Monetary Sin of the West”

Washington, Wall Street and the “Monetary Sin of the West”

By John D. Mueller[1]

Catholic Finance Association Panel,

“Has the culture of Wall Street changed since the credit crisis of 2008?”

New York, N.Y. 31 July 2013

I’m grateful to the Catholic Finance Association for hosting this panel asking, “Has the culture of Wall Street changed since the credit crisis of 2008?” I can agree in part with the other two panelists. In fact, I’d like to bottle what Carla Harris has to offer. It’s easy to see why she is such a widely sought inspirational speaker.

I’m afraid that I can’t offer inspiration. Daniel Kahneman, who though a psychologist won the 2002 Nobel Prize in economics for helping pioneer the study of cognitive biases, explained, “When the handsome and confident speaker bounds onto the stage…, you can anticipate that the audience will judge his comments more favorably than he deserves. The availability of a diagnostic label for this bias—the halo effect—makes it easier to anticipate, recognize, and understand.”

Because of multiple sclerosis, I’m afraid I can no longer bound. And my effectiveness as a public speaker has been undermined by annoying quirks in speech, creating a kind of anti-halo effect.  I hope that it does not distract from what I have to say.

For the Catholic Finance Association, I plan to speak partly American, partly Wall Street and partly Catholic.

Has the culture of Wall Street changed since the financial crisis of 2008? Emphatically not. The reason is that culture does not exist in a vacuum, and the crisis itself, like every major American financial crisis going back at least to the Great Depression, was caused by a monetary peculiarity which warps the incentives at both ends of Pennsylvania Avenue and on Wall Street.

To put it in American: There are four principles of all successful American economic policy. The first was established by Alexander Hamilton, our first Treasury Secretary, under George Washington—both of whom had recent bitter experience with the feckless Continental Congress and colonial governments. That first principle is, don’t print money to finance the Federal budget.

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Kathleen M. Packard, Publisher
Ralph J. Benko, Editor

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Professor Jacques Rueff

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