Mervyn King’s recent tome, “The End of Alchemy”, is an engaging but mysterious endeavour. It is a mix of real insights and at times hinting at fairly radical thinking, but intermingled with some ambivalence and contradiction. Big questions are raised, some important proposals put forward, but his conclusion on future macroeconomic policy in particular is a huge disappointment.
King’s proposals for reform – though interesting – assume that it is the “alchemy” in the banking system that we need to contend with. Yet the major problem to be addressed is surely how to control the huge flows of footloose capital which are endemic to the post 1970s era of financial liberalization.