Shaikh, Salman (2012): Lessons from the Great Recession: Need for a New Paradigm. Published in: Journal of Economics & International Finance , Vol. 4(6), No. 2 (1. February 2012): pp. 131-136.
Download (325kB) | Preview
The ongoing sovereign debt crisis in Europe and U.S. is challenging the conventional wisdom and is creating fears of a double dip recession in 2012. Massive levels of debt and consumption beyond means and speedy financial innovation with lax regulation has put major economies in a deep hole. Monetary policy with ease in rates had been ineffective to say the least in generating new jobs in last few years when interest rates were kept at near zero level since 2008 in U.S. Fiscal stimulus again targeted the undisciplined financial sector which did not use the stimulus for extending credit to the private sector as much as was required. With business cycle fluctuations, mounting consumer and fiscal debt is unsustainable and one lesson of the crisis is that business cycles are for real and here to stay. The securitization of consumer debt magnified the losses and created negative unjust effects on savers and taxpayers which had nothing to do with the mess in the first place. In this backdrop, a new paradigm is needed which put the focus back on productive enterprise, brings recovery with job creation, limit and regulate speculative financial institutions and instruments and improve corporate governance by influencing the incentives more deeply and proactively.
|Item Type:||MPRA Paper|
|Original Title:||Lessons from the Great Recession: Need for a New Paradigm|
|Keywords:||Great Recession, Great Depression, Financial Crisis, Credit Crunch, Subprime Mortgage Crisis, Housing Market Bubble, Securitization, Leveraging, Shadow Banking|
|Subjects:||E - Macroeconomics and Monetary Economics > E0 - General > E02 - Institutions and the Macroeconomy
E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates > E44 - Financial Markets and the Macroeconomy
E - Macroeconomics and Monetary Economics > E6 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook > E63 - Comparative or Joint Analysis of Fiscal and Monetary Policy ; Stabilization ; Treasury Policy
|Depositing User:||Salman Shaikh|
|Date Deposited:||03. May 2012 07:40|
|Last Modified:||12. Feb 2013 09:28|
Alexander, Katkov (2010). The Great Recession of 2008-2009 & Government’s Role. Proceedings of ASBBS. Volume 18 Number 1.
Greenspan, Alan (2010). “The Crisis.” Greenspan Associates LLC.
Greenspan, Alan. 2004. “Risk and Uncertainty in Monetary Policy.” American Economic Review Papers and Proceedings 94(2), pp. 33–40.
Hurd & Rohwedder (2010). Effects of the Financial Crisis and Great Recession on American Households. Working Paper 16407.NATIONAL BUREAU OF ECONOMIC RESEARCH. http://www.nber.org/papers/w16407
Jagannathan et al. (2009). Why are we in a Recession? The Financial Crisis is the Symptom not the Disease! Working Paper 15404. NATIONAL BUREAU OF ECONOMIC RESEARCH. http://www.nber.org/papers/w15404
Krugman, Paul [September 02, 2009]. “How Did Economists Get It So Wrong?”. Op-Ed Page, NY Times.
Palley, Thomas I. (2009). America’s Exhausted Paradigm: Macroeconomic Causes of the Financial Crisis and Great Recession. Working Paper, No. 02/2009. Institute for International Political Economy Berlin.
The Economist. [January 14, 2012]. “France goes soft-core”. The Economist Newspaper Limited.