Global Financial Crisis 2008 and Beyond: A Rude Awakening

8 Pages Posted: 20 Dec 2012

See all articles by Assaf Razin

Assaf Razin

Tel Aviv University - Eitan Berglas School of Economics; National Bureau of Economic Research (NBER); CESifo (Center for Economic Studies and Ifo Institute); Centre for Economic Policy Research (CEPR)

Steven S. Rosefielde

University of North Carolina (UNC) at Chapel Hill - Department of Economics

Date Written: 2010

Abstract

The global financial crisis which began with the subprime mortgage crisis and exploded in September 2008 with the collapse of Lehman Brothers bank, took much of the macroeconomic profession by surprise, even though there were ample early warning signs. Theorists failed to adequately consider the destabilizing cumulative impacts of financial deregulation, hedge funds, electronic trading, shady financial entrepreneurship, moral hazard, regulatory laxness, regulatory hazard ("mark to market" FAS 157), structural deficits, the shift from Keynesian investment stimulus to general aggregate demand management, Phillip's Curve justified perpetual monetary ease, subprime mortgages, derivatives, one-way-street speculation, "too big to fail" psychology, hard asset speculation (real estate, commodities, natural resources, precious metals, art, antiques, jewelry), fiscal abuses, special interest transfers and stealthy Chinese protectionism, beyond normal business cycle oscillations, because they had come to believe that policymakers had learned how to tame the beast. With the advantage of hindsight, two years after the mast, both the strengths and weaknesses of the third millennium macroeconomic consensus can be discerned and appraised with an eye toward parsing the future.

Suggested Citation

Razin, Assaf and Rosefielde, Steven S., Global Financial Crisis 2008 and Beyond: A Rude Awakening (2010). Israel Economic Review, Vol. 8, No. 2, 2010. Available at SSRN: https://ssrn.com/abstract=2191589

Assaf Razin (Contact Author)

Tel Aviv University - Eitan Berglas School of Economics ( email )

P.O. Box 39040
Ramat Aviv, Tel Aviv, 69978
Israel
+972 3 640 7303 (Phone)
+972 3 640 9908 (Fax)

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

HOME PAGE: http://www.CESifo.de

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Steven S. Rosefielde

University of North Carolina (UNC) at Chapel Hill - Department of Economics ( email )

Chapel Hill, NC 27599
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
79
Abstract Views
566
rank
307,549
PlumX Metrics