Bad financial moon rising :: Mmegi Online

A decade after the collapse of Lehman Brothers, global debt levels are higher than in 2008, lending has moved into the opaque realm of asset management and private equity, and the dollar is surging. Given the proliferating risks, another financial crisis and downturn could be in store. WILLIAM WHITE* writes

BASEL: No one should overestimate economists’ powers of understanding. Just as the magnitude of the global downturn that began in mid-2008 took most economists completely by surprise, so did the sclerotic nature of the recovery. Similarly, economic forecasts today appear to be nothing more than hopeful extrapolations of recent growth.

In reality, all is not well beneath the surface. Should another financial crisis materialise, the subsequent recession might be even costlier than the last one, not least because policymakers will face unprecedented economic and political constraints in responding to it.

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