How a Decade of Financial Crises Changed the World
Updated: Apr 6, 2022
John Cassidy of The New Yorker, in reviewing Adam Tooze’s book Crashed: How a Decade of Financial Crises Changed the World (2018) says the aftermath of the 2008 financial crisis produced a lost decade for European economies and helped lead to the rise of anti-establishment political movements here and abroad.
“September 15th marks the tenth anniversary of the demise of the investment bank Lehman Brothers, which presaged the biggest financial crisis and deepest economic recession since the nineteen-thirties. After Lehman filed for bankruptcy, and great swaths of the markets froze, it looked as if many other major financial institutions would also collapse. On September 18, 2008, Hank Paulson, the Secretary of the Treasury, and Ben Bernanke, the chairman of the Federal Reserve, went to Capitol Hill and told congressional leaders that if they didn’t authorize a seven-hundred-billion-dollar bank bailout the financial system would implode. Some Republicans reluctantly set aside their reservations. The bailout bill passed. The panic on Wall Street abated.”
For a view from the other side of the pond, check out David Runciman of University of Cambridge Talking Politics August 29, 2018 podcast interview of Adam Tooze. Geo-politics and economics only make sense together. China’s investments in the U.S., the banking crisis and oil prices are part of the picture.
Runciman argues in his 2018 book is How Democracy Ends that rather than experiencing a return to the 1930’s “we will continue to trust in democracy long after it has ceased to work.” His recent Darwin lecture on Trump as conspiracy theorist can be seen here.
Democracy has died hundreds of times, all over the world. We think we know what that looks like: chaos descends and the military arrives to restore order, until the people can be trusted to look after their own affairs again. However, there is a danger that this picture is out of date. Until very recently, most citizens of Western democracies would have imagined that the end was a long way off, and very few would have thought it might be happening before their eyes as Trump, Brexit and paranoid populism have become a reality.
Meanwhile Goldman Sach’s so-called bull-bear indicator, which examines five market factors, indicates that “the likelihood of a bear market occurring is at its highest point since around the mid-1970s… and a period of lower returns should be anticipated.”
A month and a half ago Morgan Stanley warned to “prepare for the biggest stock-market selloff in months.”
John Hussman, whose claim to fame includes forecasting the market collapses of 2000 and 2007-2008, has repeatedly called for sharp stock market decline with his oft-repeated mantra of “overbought, overvalued, overbullish.”