Four lessons not learned from the 2008-9 financial crisis
An article by John Harvey published in late 2018  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:
If you are going to bail someone out, bail out the debtor and not the creditor.
Financial institutions should be very closely supervised.
The market is not always right.
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.