Columbia University Professor Frederic Mishkin is a renowned expert on banking, finance and monetary policy. I heard him present to the Lowy Institute for International Policy yesterday about the GFC and its aftermath. "It was actually much more of a shock than the Great Depression", he said. "Only the active involvement of central banks to the limits of their authority prevented a catastrophe!"
Australia, Chile, and China were the only countries to come through relatively unscathed. Compared to the U.S., Australia didn't have to make sub-standard loans, we had fewer financial institutions, the right commodities, and principles-based supervision by our central bank which worked!
Mishkin says the future now depends on the "path of fiscal debt in the U.S., particularly around promises we can't keep", and "whether the Europeans get it!" Weakened independence of central banks, and lack of discipline in debt-restructuring will mean recovery will be slow.
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