A crumb of comfort during the 2008/09 financial crisis was the thought that we were living through historic times. But to face another historic event barely a decade later is perhaps a bit much. The financial – macro relationship The so-called global financial crisis (which was actually a crisis of the US financial system and… Continue Reading
Tag Archives: GFC
Still debating the causes of the world financial crisis
Major world historical events such as the financial crisis that swept much of the world in 2007-09 typically have multiple causes. In 2014 there was an outpouring of new books about the causes of the First World War which started a century before. Historians continue to disagree about why the nations of Europe went to… Continue Reading
What is shadow banking?
Shadow banking is a term that was invented by Paul McCulley, the former chief economist of the giant fund manager PIMCO, in 2007. He was one of the first to identify and analyse the growth of chains of financial transactions in the US that had the economic substance of commercial banking but weren’t regulated, and… Continue Reading
How to bankrupt a bank
The aftermath of the global financial crisis left many people with an impression of modern finance as extraordinarily complex, a web of multi-layered securities financed through strange off-balance sheet vehicles and held together by impenetrable mathematical formulas. There is something in this account but it’s important to remember that the most important reasons for bank… Continue Reading
Bankers were deluded rather than evil – some evidence
A great piece of research from the authors at the University of Michigan and Princeton University (*) tests the hypothesis that the bankers inside the sub-prime mortgage bubble knew it was all too good to last. They find the hypothesis false. Many of the bankers in mortgage securitisation (transforming bank mortgage loans into bonds that were… Continue Reading