I never realized before reading History of finance in five crisis essay, published by economist news paper, that today's fiance world is mainly shaped by the crisis and slumps.
But in modern world finance is much beyond than this. If it fails than it left behind a legacy of unemployment people , debt and year or decades of no growth.
Today we can't imagine banking regulation without central bank but invention of central bank was also outcome of one of such crisis, History of the Federal Reserve. Same trend is still continue and after the 2008 sub prime crisis, new laws are already passed and some more are getting ready.
But question remains same whether another crisis will unfold in future or not.
After almost every crisis new policies were crafted , new institutions were setup , new tools were discovered to make the system more robust and to avoid the future crisis but crisis and slumps were repeated and repeated. Even today we can't say that a new financial crisis will not happen.
From the economist essay, The core of finance is "finance does just two simple things. It can act as an economic time machine, helping savers transport today’s surplus income into the future, or giving borrowers access to future earnings now. It can also act as a safety net, insuring against floods, fires or illness. By providing these two kinds of service, a well-tuned financial system smooths away life’s sharpest ups and downs, making an uncertain world more predictable. In addition, as investors seek out people and companies with the best ideas, finance acts as an engine of growth"
Today we can't imagine banking regulation without central bank but invention of central bank was also outcome of one of such crisis, History of the Federal Reserve. Same trend is still continue and after the 2008 sub prime crisis, new laws are already passed and some more are getting ready.
But question remains same whether another crisis will unfold in future or not.
No comments:
Post a Comment