Page 19 - Monocle Quarterly Journal Vol 1 Issue 1 Q4

The Art of Failure: Predicting Financial Distress Pre-Crisis
BY MONOCLE RESEARCH TEAM
Policy Response to the Financial Crisis Hides Underlying Realities
It is generally agreed amongst economists, bankers, politicians and the man on the street that the 2007/8 Financial Crisis was the worst economic crisis to befall western economies since the Great Depression of the 1930s. Some call it the Great Recession and some call it the Financial Crisis – its full impact has not yet been fully understood.
During the Great Depression, policy makers took far too long to adequately respond to the impact of the severe stock market decline of 1929. Instead, policy makers in western economies, G8 countries and across the world, in the case of the 2007/8 crisis, reacted extremely quickly, through extreme monetary interventions, as well as through some – most likely insu cient – scal interventions. is was of course entirely necessary given that con dence, not only in the markets, but also in the very notion of capitalism itself was under attack. Several commentators had even questioned the long term viability of capitalism as a political economic system.
In order to save the world from itself the central banks punted enormous amounts of liquidity into the market, wrote thousands of pages of legislation that would require banks to hold more capital and more liquid assets and to meet far more exacting standards than previously. To a large degree, these alterations to a previously laissez-faire economic playground have been successful. For one thing, the more extreme predictions that immediately followed the initial crisis in 2008 have not come to bear. Europe, although growing at a very slow pace is still growing. Asian economies have not yet collapsed and the US is actually growing reasonably well.
What is masked, however, by these extreme acts of government inter- vention are the basic statistical realities of what fundamentally changed
“What is masked, however, by these extreme acts
of government intervention are the basic statistical realities of what fundamentally changed within the global banking system.”
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