Eventually the banking systems of all advanced economies reach magnitudes of 500 percent,
ALAN M. TAYLORMore financial instability will introduce more uncertainty all down the line.
More Alan M. Taylor Quotes
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A possibility is that we see more and more leverage, and credit-to-GDP ratios rise once more to even higher levels.
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Absent significant regulatory or tax changes, and a sharp transition could be disruptive.
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We have never in human history seen a run-up in credit of the kind we have just witnessed in advanced economies since 1970.
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If we have moved back to a regime of regular financial crises – like the one we had from the 1870s to the 1930s.
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More financial instability will introduce more uncertainty all down the line.
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In the immediate postwar era, financial crises in advanced countries were rare events, and before 1970 did not happen at all.
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Then our economic future will be very different from our recent past.
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It’s just very hard to teach a class of students about what has happened in the Global Financial Crisis.
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How we ended up there and how we got to where we are today, without having some basic.
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Furthermore, this pattern is seen across all the advanced economies, and isn’t just a feature of some special subset (e.g. the Anglo-Saxons).
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Since then they have occurred more often, and 2008 was the most damaging of them all to date.
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And we have never observed modern finance-capitalist systems operating over a sustained period at this kind of credit-to-GDP leverage ratio.
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Non-trivial understanding of the financial sector, credit, and the banking system.
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We may end up with a world based more on equity than debt, or more on market debt instruments than bank intermediation; but how and why we get there is a mystery.
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Macroeconomic stability will be more elusive and that will affect all of our lives: from the risks many will face in childhood.
ALAN M. TAYLOR