"Mervyn King may well have written the most important book to come out
of the financial crisis. Agree or disagree, King's visionary ideas
deserve the attention of everyone from economics students to heads of
state." Lawrence H. Summers
Something is wrong with our banking system. We all sense that, but
Mervyn King knows it firsthand; his ten years at the helm of the Bank of
England, including at the height of the financial crisis, revealed
profound truths about the mechanisms of our capitalist society. In The
End of Alchemy he offers us an essential work about the history and
future of money and banking, the keys to modern finance.
The Industrial Revolution built the foundation of our modern capitalist
age. Yet the flowering of technological innovations during that dynamic
period relied on the widespread adoption of two much older ideas: the
creation of paper money and the invention of banks that issued credit.
We take these systems for granted today, yet at their core both ideas
were revolutionary and almost magical. Common paper became as precious
as gold, and risky long-term loans were transformed into safe short-term
bank deposits. As King argues, this is financial alchemy?the creation of
extraordinary financial powers that defy reality and common sense. Faith
in these powers has led to huge benefits; the liquidity they create has
fueled economic growth for two centuries now. However, they have also
produced an unending string of economic disasters, from hyperinflations
to banking collapses to the recent global recession and current
stagnation.
How do we reconcile the potent strengths of these ideas with their
inherent weaknesses? King draws on his unique experience to present
fresh interpretations of these economic forces and to point the way
forward for the global economy. His bold solutions cut through current
overstuffed and needlessly complex legislation to provide a clear path
to durable prosperity and the end of overreliance on the alchemy of our
financial ancestors.
