fearless girl statue snow Drew Angerer/Getty Images

Financial Stability in Abnormal Times

Despite improvements in the financial system since the 2008 crisis, the piecemeal reforms that have been enacted fall far short of what is needed. And an inexorably growing financial system, combined with an increasingly toxic political environment, means that the next major financial crisis may come sooner than you think.

CAMBRIDGE – A decade on from the 2008 global financial crisis, policymakers constantly assure us that the system is much safer today. The giant banks at the core of the meltdown have scaled back their risky bets, and everyone – investors, consumers, and central bankers – is still on high alert. Regulators have worked hard to ensure greater transparency and accountability in the banking industry. But are we really all that safe?

Normally, one would say “yes.” The kind of full-blown systemic global financial crisis that erupted a decade ago is not like a typical septennial recession. The much lower frequency of systemic crises reflects two realities: policymakers respond with reforms to prevent their recurrence, and it normally takes investors, consumers, and politicians a long time to forget the last one.

Unfortunately, we don’t live in normal times. Crisis management cannot be run on autopilot, and the safety of the financial system depends critically on the competence of the people managing it. The good news is that key central banks still, by and large, have excellent staff and leadership. The bad news is that crisis management involves the entire government, not just the monetary authority. And here there is ample room for doubt.

We hope you're enjoying Project Syndicate.

To continue reading, subscribe now.

Subscribe

Get unlimited access to PS premium content, including in-depth commentaries, book reviews, exclusive interviews, On Point, the Big Picture, the PS Archive, and our annual year-ahead magazine.

http://prosyn.org/cEWhVVK;
  1. haass102_ATTAKENAREAFPGettyImages_iranianleaderimagebehindmissiles Atta Kenare/AFP/Getty Images

    Taking on Tehran

    Richard N. Haass

    Forty years after the revolution that ousted the Shah, Iran’s unique political-religious system and government appears strong enough to withstand US pressure and to ride out the country's current economic difficulties. So how should the US minimize the risks to the region posed by the regime?

Cookies and Privacy

We use cookies to improve your experience on our website. To find out more, read our updated cookie policy and privacy policy.