CleanBanks
Robijn_2

Avoiding The Next Banking Crisis

A blog about the financial markets, by Robijn Hornstra.

Welcome to Cleanbanks and thank you for visiting!

Cleanbanks is a blog about the financial world, the real economy and what I call the financial market. The financial world consists of a vast array of different financial institutions. This includes banks, insurance companies, hedge funds, central banks, etcetera. In the real economy you find households, shops, factories, workers, buyers, sellers, farmers and so on. The real economy consists of all people or firms that are not a financial institution.

These two worlds are not independent of one another. On the contrary, they are highly interdependent. It does not make sense for a bank to issue a loan if someone in the real economy does not use it to buy a house or a factory. Likewise, people in the real economy use money, which is created in the financial world, to buy goods. Where the two worlds intersect is what I call the financial market.

In the financial market, financial institutions offer their products. These financial products are used by the participants in the real economy. It is important to understand that I consider the real economy leading. The financial world only exists to facilitate activities in the real economy. While the real economy could function without the financial world, the reverse is not the case.

Posts in Cleanbanks are assigned to these three areas. Some posts straddle more than one area. Hence you will find them in multiple places. If you move your cursor over the button blog at the top of the page you will see links to each of the areas.

Latest blog entry

A disastrous idea from Brussels

by Robijn Hornstra.

Back in 2008 the US financial system was near collapse. Today the Eurozone’s existence is under threat. In Europe it is the vulnerability of the financial system that is troubling. It is so vulnerable it precludes a restructuring of the debt burden of countries such as Greece. Like in the US, European lawmakers and regulators are determined to boost the resilience of the financial firms. Dodd-Frank was the major legislative push in America. In Europe things come more piecemeal. One of the European initiatives is particularly troubling to me. Bloomberg reported on November 30 that the European Commission is about to propose legislation intended to limit the flight of short-term financing from banks in trouble. I think the idea, while well intentioned, is a disaster and should be abandoned immediately.