13. Economist's View
March 22, 2009 § Leave a comment
These essays continue to be very good. Not much ideology, more craftsmanship (which does assume a worldview , it is not culture free.)
Three important misconceptions could lead to a disastrous reform agenda:
- That the crisis was caused by current account imbalances, particularly by net flows of savings from emerging markets to the US.
- That the crisis was caused by easy monetary policy in the US.
- That the crisis was caused by financial innovation.
In our view, a far more plausible argument is that the crisis was caused by ineffective supervision and regulation of financial markets in the US and other industrial countries driven by ill-conceived policy choices. The important implication of the crisis itself is that for the next few years, at least, the misbehaviour that flourished in this environment will not be a problem, unless replicated under government pressure to restore the flow of credit to the uncreditworthy. If anything, excessive risk aversion and deleveraging will limit effective private financial intermediation. So the first precept for reform is that there is no hurry.
via Economist’s View.