Another financial crash is coming, haven’t we learned from 2008?

Mounem Benaziz

Published: Updated:

September 15, 2008, was not the beginning of the greatest financial crisis since 1929, nor did it result in a total economic slide. When the US authorities allowed Lehman Brothers investment bank in New York to go bankrupt, what could not be imagined until then became reality.

Millions of taxpayers, houses buyers and wage earners had to bear the consequences of some irresponsible CEOs at the helm of funds, central bankers and governors partly consumed by greed and the inaction of others. Many of them, we were to discover later, really lacked discipline or training.

Growth has since returned a decade later. The central banks, despite being responsible for the crisis, have never been this powerful. Stock markets are achieving new records.

The question now is, would any tinkering operation - like the one that took place 10 years ago - even under more strict curbs, be able to contain any upcoming economic shock?

Out of control

Nothing can guarantee this. The debts seem bigger than the ones that triggered the crisis 10 years ago. The shadow funding, which became out of control, went beyond banks. Central banks had, in an unprecedented manner, injected huge liquidity to revive the economy. The result was the prevalence of speculation, almost everywhere. No one knows how to return to normalcy without risking more instability.

What is more worrying is that most likely the solutions adopted in 2008 would not be effective for the coming crisis. There would be no time to revive or pause the banking methodology. Interest rates are so low for the central banks to use facilitating credit to reinforce the economy.

Ten years ago, an international coordination prevented the mistakes of 1929, starting from the use of protectionism.

Today, the commercial war threatens everyone, and diversity and openness are about to collapse.

Without having the courage to reconsider the current system, the chaos might be greater next time.

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