Editor’s view: Bank Sarasin is right to draw attention to such troubling developments as the surge in regulatory action in recent years. Whether many of the changes coming into force benefit people is highly uncertain. There can be no doubt that the sheer scale of public debt – and fears governments will use the old method of money printing to deal with it – is a cloud hanging over many developed nations’ prospects. The crisis facing the West is often not seen as an issue of “liberty” in a broad sense; in fact, much of the narrative in the media and elsewhere since 2008 has been how the crisis is a crisis of “unregulated” markets. That narrative is largely nonsense, but enormously influential nonsense. Bank Sarasin deserves credit for trying to reframe the debate. Far from suffering from an excess of freedom, the world needs a lot more of it.

The financial crisis triggered a surge of regulatory action while central banks’ independence has been over-borne by politics, Bank Sarasin argues in a report warning that economic liberty is under threat from such trends and should be regained.

In a regular Perspectives study, the Swiss private banking group takes a broad look at changes affecting the global financial and economic system since the market turmoil of 2008 and the subsequent bank rescues and stimulus packages.

And the bank argues that against a background of “financial repression” policies aimed at keeping interest rates very low, it made sense for investors to allocate significant capital to equities and property assets. “In uncertain times, traditionally riskier assets like stocks or commodities can stabilise an investment portfolio better than bonds can. Emerging markets as well present a good investment environment. Direct investments in emerging-market stocks or bonds offer better long-term prospects than investments in Western industrialised countries,” it said.

Setting out its broad analysis of trends since 2008, Bank Sarasin noted three serious failings in the global system leading up to the crisis.

"Three regulatory deficiencies were leading contributing causes of the financial crisis: the US’s rejection of centralising derivatives contract trading, bank capital adequacy, and the disastrous US mortgage market. The raising of international equity capital requirements for banks marks the biggest progress achieved to date. But there is still far to go to clear the way for the next generation to regain the liberty that today lies in chains," Burkhard Varnholt, chief investment officer at Bank Sarasin, said.

“Economic liberty”, the bank said, has been held down by expanding regulations and exploding public debt.

Governments have, with few exceptions, wasted the chance to use the crisis to bring public finances under sustainable control, the report said.

“Although most of the bank rescues have been unwound by now with a profit for the respective supporting governments, the rescue frenzy also gave birth to numerous debt-financed economic stimulus and growth packages. It will take courageous political decisions to avert sovereign insolvencies in many industrialised countries in the years ahead,” the bank said.

Bank Sarasin also warns about what it sees as a loss of monetary policy independence by central banks.

“By involving monetary policy in general economic and fiscal policy, central banks have jeopardised their policymaking independence. A good monetary policy must never be subordinated to the necessities of economic policy. Does the current unconventional monetary policy help or harm future generations? The US, the UK and Japan....demonstrate that subordinating a central bank to economic policy becomes a fundamental liability when the central bank is its own government's biggest creditor,” the report continued.

The report went on to suggest that recent regulatory changes dealt with symptoms rather than underlying causes of problems.

“Increasing financial market regulation and state intervention in the banking sector are not a lasting answer to the 2008 financial crisis. Over the last four years, for example, internationally operating banks have had to integrate an average of more than 100,000 pages of new regulatory directives into their business procedures. This immense thicket of rules is not a solution for strengthening financial systems,” it said.