The Economist magazine has started a five part series on the Global Financial Crisis, and the lessons from it. Should be a lot of fun. Part one is here. They conclude:
The regulatory reforms that have since been pushed through at Basel read as an extended mea culpa by central bankers for getting things so grievously wrong before the financial crisis. But regulators and bankers were not alone in making misjudgments. When economies are doing well there are powerful political pressures not to rock the boat. With inflation at bay central bankers could not appeal to their usual rationale for spoiling the party. The long period of economic and price stability over which they presided encouraged risk-taking. And as so often in the history of financial crashes, humble consumers also joined in the collective delusion that lasting prosperity could be built on ever-bigger piles of debt.
A lot of what they say in the article is true, although I will be honest that I don’t fully agree with their description of the lead up to the crisis … and as a result, will probably have some differences of opinion in terms of what I view as appropriate lessons. However, I will leave all this for another time [Note: Many of these things involve markets - but then many of the explanations involve only looking at "one side". This is common, but always a touch disingenuous IMO]
Feel free to discuss the GFC, and the description of the causes by the Economist, in comments below!