While the consequences of the credit crunch appear all too apparent, the intricacies of the complex financial instruments involved, combined with the vast sweep of the global financial system, seem to defy explanation. Attempts to accuse negligent regulators, fraudulent brokers and greedy borrowers cast much blame but little light on the causes of the crisis.
Are the current problems a sign that the developed world has been living off credit for too long? The United States is still by far the world’s largest and wealthiest economy, so why for so long has it been reliant on credit supplied by the smaller and poorer economy of China? In the past 30 years, the UK economy has shifted away from manufacturing towards financial services. In many ways London is the pre-eminent world financial centre, but is this a source of weakness rather than strength, leaving the UK more exposed to financial crises?
|Dr Michael Savage
blogger, Grumpy Art Historian
economist and business manager; author, Creative Destruction: How to start an economic renaissance
financial services professional; researcher and writer, emerging economies and quantitative finance
After implementing the largest government bail-out in history, the US continues to tell other nations, "do as I say, not as I do"Ha-Joon Chang, Guardian, 20 October 2008
Bank panics always have the same origin. “Every genuine business panic springs from the same root, which is rank speculation,” wrote one Victorian commentator.Edward Chancellor, Financial Times, 14 October 2008
The point at which a Minsky moment becomes a Minsky meltdown has arrived.George Magnus, Financial Times, 13 October 2008
The worst financial crisis since the Depression is redrawing the boundaries between government and markets, says Zanny Minton Beddoes. Will they end up in the right place?Economist, 11 October 2008
“Things that can’t go on forever, don’t.” – Herbert Stein, former chairman of the US presidential Council of Economic Advisers.Martin Wolf, Financial Times, 8 October 2008
Monday was the most momentous day on Wall Street since the 1930s. America said no to another bailout and farewell to two venerable institutions, Lehman and Merrill Lynch.Evan Davis, BBC News, 15 September 2008
We are more than a year into the credit crunch, and there is a slew of books assessing what went wrong and what we should do about it.Michael Savage, fundstrategy, 1 September 2008
A concise attempt to elaborate in just seven short chapters the genesis of the housing bubble, explode its myths, explore its scale and the dangers of its deepening impact, assert the need to maintain confidence in our economic and financial institutions by aggressive action, and then explore longer-term, more fundamental reforms and innovations that will create a population much more attuned to economic risk.
Robert Shiller, Princeton University Press, 31 July 2008
Mr. Minsky explains why the American economy has experienced periods of debilitating inflation, rising unemployment, and marked slowdowns-and why the economy is now undergoing a credit crisis that he foresaw.
Hyman Minsky, McGraw-Hill Professional, 1 May 2008
Robert Bruner & Sean Carr, John Wiley & Sons, 14 September 2007