Https://www.thebriti Shacademy.ac.uk/site S/default/files/03-B Esley.pdf

03-Besley.pdf
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Summary

The British Academy convened a forum to debate the Queen's question about why nobody noticed the credit crunch was coming. Many people did foresee the crisis, but not its exact form, timing, or ferocity. Experts cited warnings about imbalances in financial markets and the global economy, but risk calculations were often confined to specific financial activities, losing sight of the bigger picture. The "global savings glut" led to low returns on safe investments, causing investors to seek higher returns at greater risk. Many warned of dangers, but most believed banks knew what they were doing, and financial models were good at predicting short-term risks, not long-term ones. Authorities had difficulties managing risks due to a "feel-good" factor, with households, businesses, and governments benefiting from low unemployment, cheap goods, and ready credit. Regulators faced pressure for lax regulation, and there was a consensus that it was better to deal with the aftermath of bubbles rather than trying to head them off. Inflation remained low, and interest rates were low by historical standards, leading to a prevailing view that monetary policy should focus on preventing inflation, not controlling wider imbalances.

Description

The British Academy convened a forum to debate the Queen's question about why nobody noticed the credit crunch was coming.

Technical Information

  • File Format: PDF
  • File Size: 258 KB
  • Pages: 3
  • Language: EN
  • Total Downloads: 162
  • Last Updated: 4 weeks ago

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