Thursday, September 19, 2013

Lehman + 5: Have policy makers tackled the causes of the crisis? No


…excess savings reflect a fundamental problem: a growing gap between financial hope and economic reality. Even before the financial crisis, the evidence increasingly suggested that western economies were slowing down. Relative to consensus, US economic growth has disappointed year after year, during good times and bad. Other countries have fared even worse. Driving up asset prices in the hope that this structural malaise can be overcome may only sow the seeds of future financial upheavals.
Instead, there has to be a much greater focus on the growing inconsistency between low structural growth rates in the West, underdeveloped and illiquid capital markets in the emerging world and a persistent but ultimately malignant hunt for yield. The political implications may be unappealing – higher retirement ages, tougher regulation, lower returns, harder work – but better, surely to tackle the underlying problems than continuously to pretend that the monetary magic wand can solve all problems. (King, 2013) (bold emphasis added)
Read the rest  of the post by Stephen King here

Reference:

King, S. (2013, September 19). Policy makers have not tackled the causes of the crisis. Financial Times. Retrieved from http://blogs.ft.com/the-a-list/2013/09/19/policy-makers-have-not-tackled-the-causes-of-the-crisis/