We learn from mistakes. The terrorist attacks of September 2001 helped us to take terrorists far more seriously. The global financial crisis of 2008 can help us predict the next crisis and take necessary back-ups as we cannot avoid a financial crisis as per economist Keen, the one who predicted the last crisis. The failure of Lehman brothers unleashed chaos, but it's not the only cause. It is also expected that after huge rate hikes specially by the Fed have resulted in a recession, and like other crisis, there is reason to believe that this is also going to be the same.
The size of financial crisis maybe reduced. The banks are now in more equity and less debt, also, they depend less on trading to make money and on short term wholesale borrowing to finance their activities. The banks must be kept under regular surveillance and keep a check on their plans and the NPA's. The 2008 crisis was neglected by most of the economists due to the 'great moderation', but this can't be the case this time, we have learned from our mistakes. Not always. After the 2008 crisis, the government of America should have stood beside the failing banks but instead abandoned insolvent households, due to this many Americans lost their homes, unemployment also rose. The financial crisis also unearthed a number of long term problems which were needed to be taken care of- housing, offshore dollar finance, and the euro.
The next financial crisis is expected to involve property, as none of the governments have ever boosted household credit. Every State's financial regulations encourage banks to lend against property rather than make loans to business. But politicians fail to realise the gain from this regulation. They fail to give incentives and perks such that there can be a boost to household loans. The value of American dollar has also varied from the last crisis among various countries. The only country that dealt with the crisis properly was Iceland. They designed a comprehensive accountability policy, based on two objectives: establishment of the truth, and punishment of the responsible. An independent commission was also established to look after the matter, and immediate actions were taken based on their report. In the awakening of the next global financial crisis, we must learn lessons from Iceland and implement them accordingly.
The size of financial crisis maybe reduced. The banks are now in more equity and less debt, also, they depend less on trading to make money and on short term wholesale borrowing to finance their activities. The banks must be kept under regular surveillance and keep a check on their plans and the NPA's. The 2008 crisis was neglected by most of the economists due to the 'great moderation', but this can't be the case this time, we have learned from our mistakes. Not always. After the 2008 crisis, the government of America should have stood beside the failing banks but instead abandoned insolvent households, due to this many Americans lost their homes, unemployment also rose. The financial crisis also unearthed a number of long term problems which were needed to be taken care of- housing, offshore dollar finance, and the euro.
The next financial crisis is expected to involve property, as none of the governments have ever boosted household credit. Every State's financial regulations encourage banks to lend against property rather than make loans to business. But politicians fail to realise the gain from this regulation. They fail to give incentives and perks such that there can be a boost to household loans. The value of American dollar has also varied from the last crisis among various countries. The only country that dealt with the crisis properly was Iceland. They designed a comprehensive accountability policy, based on two objectives: establishment of the truth, and punishment of the responsible. An independent commission was also established to look after the matter, and immediate actions were taken based on their report. In the awakening of the next global financial crisis, we must learn lessons from Iceland and implement them accordingly.
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