Finance: Past, Present and Future

What happens when a country's banking system shuts down? Ben Norman and Peter Zimmerman at Bank Underground (a blog written by Bank of England staff) answer this question by looking at the industrial dispute which hit the Irish banking system in May 1970 and lasted for about six months - click here to read their post. The closure of the banking system meant that cheques could not be cleared. So what happened? Irish people still wrote cheques and retailers (and publicans!) accepted cheques, playing a very important role in keeping the Irish economy going. There is little evidence that the strike had a detrimental effect on retail sales or the economy. However, when the strike ended, some cheques did bounce and retailers and publicans did suffer some losses. Subsequently, when there was a strike in 1976, retailers etc were more cautious about accepting cheques. One publican said that "when the banks start serving booze, we will start cashing cheques"! Maybe the publicans...

Secular stagnation is where economic growth is persistently negligible or very low. The first notable economist to talk about secular stagnation was Alvin Hansen , who argued in the late 1930s that economic growth in the US was low and would remain low due to declining population growth and declining technological innovation. The post-war baby and technological booms meant that people largely forgot about Hansen's theory. However, in the light of low economic growth and near-zero real interests which have persisted since 2008, Larry Summers and others have revived the secular stagnation hypothesis - click here and here . In the video below, Oxford's Kevin O'Rourke gives a lecture to the British Academy entitled "Economic Impossibilities For Our Grandchildren?" which addresses the secular stagnation hypothesis and prescribes various policies to address it. A working paper version of his lecture is available here .