Four lessons not learned from the 2008-9 financial crisis
Editor
An article by John Harvey published in late 2018 [1] discussed four lessons that should have been learned from the 2008-9 global financial crisis.
It’s more than a decade after Lehman Brothers collapsed, and things appear to look much better in the U.S. today in many respects. After unemployment peaked at 10% in Oct 2009, it fell to 4.8% by the end of the Obama administration and today is 3.9%. Meanwhile, Eurozone unemployment hit about the same level as the U.S. in 2009 but then continued to rise to over 12% and is currently just over 8%. Sounds like the U.S. did something right and Europe did something wrong! The key difference was that the U.S. rolled out a big fiscal stimulus package while the Europeans embraced austerity. It was the Obama administration that implemented the American Recovery and Reinvestment Act of 2009. President Bush had also enacted a similar (but smaller) program and had generally approved of the 2009 bill, written while he was still president.
So what was not fixed that could still cause a catastrophic future outcome? Too much. Here’s a short list of what should have been learned but wasn’t:
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If you are going to bail someone out, bail out the debtor and not the creditor.
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Financial institutions should be very closely supervised.
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The market is not always right.
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Deficit spending doesn’t cause inflation or bankruptcy.
The bilge pumps are working hard but the holes are still there. They are a lot easier to patch when we aren’t under water. Let’s not wait too long … again.
- John T Harvey, Forbes, 17 Sept 2018 https://www.forbes.com/sites/johntharvey/2018/09/17/four-lessons-not-learned-from- the-financial-crisis/#13f8d35247bc
John Harvey is a professor of economics at Texas Christian University.
