Who Should Pay for Recessions?
I have a new column:
Who Should Pay for Recessions?: Over the last several hundred years, financial panics have repeatedly caused severe economic turmoil. For example, there were financial panics every 10 to 20 years in the late 1700s, 1800s, and early 1900s, many of which resulted in severe recessions.
To combat this instability, new rules and regulations were imposed on the financial sector after the Great Recession, and for approximately 50 years this seemed to be very successful. The bank panics that had caused so much trouble appeared to be over. But in recent years there has been a return of financial instability in the relatively unregulated shadow banking system, and a “Great Recession” associated with a financial meltdown.
The conclusion seems obvious. No matter what we do in terms of regulating the financial sector, the risk of a financial collapse and subsequent recession is always present. Given this, a question to ask is who should pay the costs of the inevitable meltdown? That is, when the financial sector gets into trouble, as it surely will at some point in the future, who should shoulder the burden? ...
Posted by Mark Thoma on Tuesday, July 14, 2015 at 02:52 PM in Economics, Financial System, Fiscal Times, Politics |
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