Preview

global finance crisis

Satisfactory Essays
Open Document
Open Document
466 Words
Grammar
Grammar
Plagiarism
Plagiarism
Writing
Writing
Score
Score
global finance crisis
Workshop on GFC
Syndicate 1– Lessons will repeat until we learn them – Stiglitz, AFR 2010
Stiglitz outlines five lessons to be learned from the GFC. Discuss each one with reference to whether you agree or not.
Rank them in of your perceived importance and discuss how well the lessons have been learnt given the turmoil in financial markets.
The thoughtfulness and originality of your answers will be assessed and challenged in class.
In brief, the five lessons are deregulation, reasons of market failure, Keynesian policies, the methods to against inflation and risk of innovation. The rating and discussion are given below.

From personal view, the most important lesson is understanding way market often do not work the way they are meant to work. According to the Efficient Market Hypothesis, governments should leave financial markets to work their magic without interference. But it seems not very accurate. This lesson was followed with undiminished faith until the GFC. This is most evident in the attention paid to rating agencies and bond markets, and the speculative bubble they helped to generate, that created the crisis in the first place.

The second lesson is deregulatory. The regulatory framework did not keep going with financial innovation, such like derivatives and securitisations. Also many laws made bankers more greed and not lead to society’s wellbeing. Thus, adequate regulations should be performed to regulate the market in order to develop peaceful.

The third lesson should be financial innovation. As mentioned above, more financial product are created without strong regulating. Although these products may bring huge benefits to investors, they have great potential risks, such like hedge funds and securitisations.

The forth lesson is monetary policy to fighting inflation. Rapid increases in a number of commodity prices followed the collapse in the housing bubble. Most central bank use monetary policy as a main method to against

You May Also Find These Documents Helpful

  • Satisfactory Essays

    Discuss the some of the actions that the Fed took during this period. Such as:…

    • 504 Words
    • 3 Pages
    Satisfactory Essays
  • Good Essays

    4. Financial markets suffered from a high degree of asymmetric information (both in the forms…

    • 541 Words
    • 3 Pages
    Good Essays
  • Good Essays

    As we have already hit the mental and physical aspects of the people. Now we walked into how they messed up the economy by their plan called “Buying on Margin.” Buying on margin was the engine for the stock market in the 1920’s. It helped fuel people to start investing and purchasing stocks. People felt this was some sort of cheat code to help solve their financial problems. To them it was like, figuring out how to time travel and erase World War I. It was known as a “Buy now, Pay later” concept of credit. It would be very effected if stock prices would rise. How the method worked was that the investor gives his broker 50% of the value of the stocks that he wanted to make a purchase and the broker would put the rest of the money away. A broker is a person who negotiates…

    • 506 Words
    • 3 Pages
    Good Essays
  • Good Essays

    “Hall of Mirrors: The Great Depression, The Great Recession, and the Uses-and Misuses of History” by Barry Eichengreen is an analytical book that compares and analyzes the two biggest financial crisis in history; the Great Depression and the Great Recession. The author is one of the few people that has gone to such great lengths to both explained and speculated as to why things happened the way they did during the two crisis and how society learned from most of their mistakes during the Great Depression but repeated others. It provides the reader with some deep critical thoughts as to whether or not society is better equipped for another financial crisis or will history keep repeating itself? The book was very well written, and informative for someone who had only the basic understanding of the two crisis, what…

    • 1010 Words
    • 5 Pages
    Good Essays
  • Good Essays

    2008 Financial Crisis

    • 2289 Words
    • 10 Pages

    Hank Paulson played a critical role in the financial crisis of 2008. How did Mr. Paulson help create the environment that led up to the financial crisis? What mistakes did he make as Secretary of Treasury when he had to manage the financial crisis of 2008? Do you think Mr. Paulson acted as an unbiased Secretary of the Treasury or did his background at Goldman impact his thinking and his actions?…

    • 2289 Words
    • 10 Pages
    Good Essays
  • Good Essays

    Global Banking Crisis

    • 734 Words
    • 3 Pages

    Answer the following question in the box below: Identify the lessons learned from the prior global banking crisis? What should be done to prevent such a crisis from happening again?…

    • 734 Words
    • 3 Pages
    Good Essays
  • Satisfactory Essays

    What is the primary lesson to be learned from the economic scandals of the early 21st century?…

    • 406 Words
    • 2 Pages
    Satisfactory Essays
  • Good Essays

    Commanding Heights

    • 603 Words
    • 3 Pages

    There were multiple lessons to be learned from the economic history of the episode. It stated that with more and more nations moving their money into a more global market, they need to be careful. With the developments of new technologies and ideas, this can change economic ideas and unforeseen events could occur. This could negatively hurt any economy. It also talked about how a single global market is now the reality. This spreading throughout a lot of economies and if it is not controlled correctly it can turn bad. The episode also talks about how with a rapid expansion of trade, it is making a wide difference between people and can cause terrorism and other acts of violence. I think another good lesson to be learned had to do with capitalism. A lot of third world countries have bad economies because they try to be capitalist. It does not work there because they do not have the right laws in place. For it to work a government…

    • 603 Words
    • 3 Pages
    Good Essays
  • Best Essays

    Greedy can be defined as having a strong desire to have more than you have already got. The bankers discussed in this piece, who were involved in the creation of products they knew little about, fit this definition perfectly. Collateralized debt obligations (CDOs) are an example of one of these products. They are bonds linked to loan packages that are sold to investors for a price that reflects their level of risk; and so are separated the originator of the debt from the bearer of the by-product. Parts of these CDOs are then supposedly insured by a complex financial instrument, known as a credit default swap (CDS), to free them from any risk they may have. However, due to their complexity, the bankers who produced them did not comprehend the extent at which the economy could be affected by their ‘risk free’ innovation, and so their lack of understanding and their blindness to everything other than their own assets, led to the creation of one of the root causes for the financial crisis. Through analysing and evaluating a variety of academic sources which explore the causes of the financial crisis of 2007-2008, I aim to prove my argument that I agree with the analysis posed in the title- that due to the greed and ignorance of bankers, their financial innovations were the main cause of the financial crisis. This essay will begin by discussing the viewpoints of Paul Mason on the awareness of bankers towards the products they were producing and selling, the reasons behind the creation of these products, and the impact that these financial innovations had upon the economy. It shall then examine the implications of Andrew W. Lo,…

    • 1679 Words
    • 7 Pages
    Best Essays
  • Powerful Essays

    Asic Criticism

    • 2399 Words
    • 10 Pages

    “Much of the criticism directed at ASIC comes from elements within the corporate sector which have a vested interest in undermining ASIC’s role. Without ASIC, the Australian corporate scene would have a far lower standard of management and directors, and accordingly the corporate sector’s status within, and contribution to, the Australian economy would be inferior, to say the least.”…

    • 2399 Words
    • 10 Pages
    Powerful Essays
  • Good Essays

    By 1933, almost half of America’s major banks were shut down. The unemployment was worsening, and affecting nearly 15 million people. However, precautions were made to prevent something this horrible from happening again. In 1934, the Securities and Exchange Commission (SEC) was founded to increase people’s trust in capital markets, and to oversee the market’s conducts. The SEC helps by requiring transparency in financial instruments being traded, and regulating brokerage firms. They also help by prohibiting some conduct like insider trading and enforcing laws in the financial…

    • 490 Words
    • 2 Pages
    Good Essays
  • Better Essays

    Bernanke Lecture

    • 1972 Words
    • 8 Pages

    • Between World War II and the recent financial crisis, macroeconomic stability was the predominant concern of central banks. • During most of the 1950s and Chairman, 1951-1970 early 1960s, the Federal [quote]"Inflation is a thief in Reserve followed a "lean the night and if we against the wind" monetary don't act promptly and policy that sought to keep decisively we will both inflation and economic always be behind." growth reasonably stable.…

    • 1972 Words
    • 8 Pages
    Better Essays
  • Better Essays

    Causes of Great Depression

    • 1620 Words
    • 7 Pages

    2. Banking and Money Policies (low interest rates, buying on credit, raise in interest rates, low reserve rates for banks)…

    • 1620 Words
    • 7 Pages
    Better Essays
  • Good Essays

    How are we doing? Is the G.D.P rising? Is the stock market strong? Are businesses prospering? Is inflation low? Is the deficit shrinking? Are exports increasing? These questions are all important economically and socially in the world today. If I knew the answers to all these things right now I would be a millionaire. Corporate businesses and wealthy people are taking over the world as we know it, and these things are constantly changing. The stock market goes up and down. Imports and exports are increasing along with the price as we can see in the petroleum ordeal that is going on today. In chapter one I learned that not only are there business economic indicators which forecast the upcoming business cycle, but…

    • 786 Words
    • 4 Pages
    Good Essays
  • Good Essays

    Relying on markets is the most dangerous feature of capitalism because it causes consumers financial…

    • 334 Words
    • 2 Pages
    Good Essays