My Journey to Austrianism via the City » The Cobden Centre


Cobden CentreFrom the article which took the Cobden Centre through 1000 views per day, My Journey to Austrianism via the City, by James Tyler:

I make the market in interest rate derivatives: a market born out of the neo classical revolution in finance fostered in Chicago during the 1970s. I am a child of Freidman, Fisher Black, Myron Scholes and the modern international financial system.

My analysis was steeped in the neo-classical, efficient markets paradigm.

Friedman’s ideal was working. Enlightened central bankers guided the free market with gentle nudges and short term liquidity infusions, free floating currencies gently adjusted themselves to the constant flow of new information and efficient and rational markets took all in their stride.

Credit flowed, people got wealthier, economies developed and all was well.

And then the crisis struck.

Markets dried up and ceased to make sense. Price moves became highly irrational.

Then the whole market edifice began to crumble. Bear Stearns going bust tore a hole in the system and Lehmans almost collapsed the entire financial world.

What had gone so badly wrong I asked myself? How could this have happened?

At about this time I was listening to the US presidential debates. A load of guff and hot air really – all except this fella called Ron Paul. He banged on about liberty, the constitution and the evil of the Federal Reserve. His ideas were fresh to my ears.

In particular he talked about what seemed like a loopy idea. He wanted Gold as money, and the free market to handle it.

Without central banks.

My curiosity had been piqued.

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