Category Archives: financial markets

Guest Blog: Financial Crisis and Reform Déjà Vu

By Simon van Norden

 

Today, we’re fortunate to have Simon van Norden, Professor of Finance at HEC Montréal (École des Hautes Études Commerciales), as a guest blogger.

“Once you’ve seen one financial market crisis…you’ve seen one financial market crisis.”

 

— Attributed to Federal Reserve Board Governor Kevin Warsh by former US Treasury Assistant Secretary for Economic Policy Phillip Swagel in The Financial Crisis: an Inside View, March 2009, p. 4.

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Reflections on the Causes and Consequences of the Debt Crisis of 2008

From “Reflections on the Causes and Consequences of the Debt Crisis of 2008,” in the La Follette Policy Report by Menzie Chinn and Jeffry Frieden:

In late 2008, the world’s financial system seized up. Billions of dollars worth of financial assets were frozen in place, the value of securities uncertain, and hence the solvency of seemingly rock solid financial institutions in question. By the
end of the year, growth rates in the industrial world had gone negative, and even developing country growth had declined sharply.

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Looking for an exit: Part 2

In my previous post I commented on Ben Bernanke’s recent communication of the Fed’s exit strategy for getting its balance sheet and daily operations back to historical norms. I suggested that one necessary ingredient to convince the public that we will see a return to a stable monetary regime would be a credible explanation of how the United States government will be able to meet its enormous current and implicit future fiscal obligations. Today I’d like to discuss a second element that I feel is missing from the exit strategy articulated by Bernanke, and this is a compelling vision of what a healthy financial market not propped up by the Treasury and the Fed would look like.

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