The Guardian view on the economy: learn the lessons of 2008 before the next slump hits |...

Discussion in 'Market News' started by Lily, Jan 27, 2016.

  1. Lily

    Lily Forum Member

    Aug 29, 2015
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    The debate about prevention and cure needs to break out of the confines of the seminar room and into the political debate
    The Federal Reserve on Wednesday shrewdly declined to draw firm conclusions about recent mercurial swings of the markets. But investors are at least wary about a new global downturn. Citizens are similarly apprehensive: on Wednesday, Ipsos Mori’s confidence index gave the gloomiest reading in three years. Meanwhile, the economics profession has still only done a fraction of the difficult thinking demanded by the last crash. Sure, there is more understanding than in 2008 about banks keeping rainy-day funds aside, and more realism, too, about complex financial products, which exist to conceal rather than to manage risks. But the deeper questions about a more sustainable prosperity, less prone to disruptive vicissitudes, remain unanswered. So, too, does the immediate question about how to resuscitate the economy when it next falls to the floor.

    The nasty end to the Nice decade – the years of non-inflationary, continuous expansion – came so abruptly in 2008 that practice had to move faster than theory. Interest-rate cuts broke all records and, before the austerity turn, there was a fiscal stimulus too. Quantitative easing, which nobody had heard of until it started happening, entered the language. The same excuse for lack of preparedness is not going to cut it again. And yet – as a sobering Resolution Foundation report lays bare on Thursday – we are in some respects even less well-placed to respond.

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