Sham investment bank research

European monetary union represents a major step on the road to European integration. The euro will promote not only economic prosperity but also political stability by leading to intensified cooperation among the countries of Europe, a stronger focus on common interests and the establishment of common institutions to help solve conflicts.

Deutsche Bank Research (1998), “Europe’s New Currency: A Special Report”, July 20. Accessed on-line at

The not-so-big secret about investment bank research is that all banks subsidize it through their other (profitable) operations — nobody will pay for the stuff. And that’s for good reason. Be it Goldman Sachs cheering the “New Economy” of the 1990s (i.e. the idea that recessions had finally become obsolete) or Deutsche Bank declaring that the euro will promote political stability and “intensified cooperation” among European countries, there is no reason to think that investment banks have a crystal ball. 

That Deutsche Bank is now out with research predicting Scottish economic calamity from a Yes vote, and that the vote will go down among history’s greatest policy errors, is worthy of no more than a snigger. I think there’s a huge irony which has escaped the DB Research team, in likening a Yes decision with the US central bank’s decision to withhold liquidity in the face of a banking panic in the early stages of the Great Depression (1929-1933). Why did the Fed (the US central bank) withhold liquidity? Because it was conforming to that era’s conventional wisdom about the business cycle (roughly: recessions are good medicine to wring the excesses out of the economy). It was “obvious” to the Fed at the time that providing liquidity was dangerous. 

These are the same investment banks that cheer-led the growth of mortgage collateralisation and other asset securitisation which ultimately helped inflate the largest credit bubble of all time before 2007. These banks led the global economy nearly over a cliff the following year. Don’t pay them notice. 
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