The Economic Crisis in Retrospect
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The Economic Crisis in Retrospect

Explanations by Great Economists

Edited by G. Page West III and Robert M. Whaples

As the United States continues its slow recovery from the global financial crisis of 2008, politicians, policymakers and academics are increasingly turning to the lessons of history to gain insight into how we might address both current and future economic challenges. This volume offers contributions by eminent economists and historians, each commenting on the theories of a particular 20th century economist and the ways in which those theories apply to modern economic thought.
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Chapter 2: Insights from Walter Bagehot

Explanations by Great Economists

Perry Mehrling


My first book, The Money Interest and the Public Interest: American Monetary Thought, 1920–1970 (1997) is a history of monetary economics. My second book, Fischer Black and the Revolutionary Idea of Finance (2005) is a history of financial economics. Those two topics come together in my talk today on insights from history for today’s trying economic times – and in my third book, The New Lombard Street: How the Fed Became the Dealer of Last Resort (2011). The connection between the two topics is what the recent crisis has been all about – the interaction of the capital markets and the money markets, how they got intertwined, and how that came unglued in the crisis. And we are still gluing it back together. I have been teaching money and banking at Barnard College at Columbia University for 15 years and a lot of my students actually work in the money markets, or down at Goldman Sachs, or somewhere like that. When I first started teaching it, I found that there was a big disconnect between the lives the students were experiencing and what was in the textbooks. So eventually I got rid of the textbooks. I started teaching The Money Market by Marcia Stigum (1989), which is a desk reference for people who trade in the repo market and other money markets.

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