The Global Financial Crisis

What’s the quality of the jobs gained in March?
PBS Newshour takes another look tonight at the latest unemployment report. Bloomberg senior economist Nela Richardson speaks with Hari Sreenivasan about whether the the jobs counted as recovered are of the same quality as those lost in the Great Recession. Richardson says BLS analysis shows that nine of 10 jobs gained in March paid less than $44,000 per year.

The Regulatory Responses to the Global Financial Crisis: Some Uncomfortable Questions
In this IMF Working Paper, the authors identify current challenges for creating stable, yet efficient financial systems using lessons from recent and past crises. Reforms need to start from three tenets: adopting a system-wide perspective explicitly aimed at addressing market failures; understanding and incorporating into regulations agents’ incentives so as to align them better with societies’ goals; and acknowledging that risks of crises will always remain, in part due to (unknown) unknowns – be they tipping points, fault lines, or spillovers. Corresponding to these three tenets, specific areas for further reforms are identified. Policy makers need to resist, however, fine-tuning regulations: a “do not harm” approach is often preferable. And as risks will remain, crisis management needs to be made an integral part of system design, not relegated to improvisation after the fact.

Remarks by Mark Carney Governor of the Bank of Canada:
Rebuilding Trust in Global Banking
In this 7th Annual Thomas d’Aquino Lecture on Leadership at the Lawrence National Centre for Policy and Management in the Western University of Ontario, Mark Carney discusses the consequences of the loss of trust within the financial and in particular the banking system and what is required to restore trust. He concludes that rather than relyingon regulation and more than mastering options pricing, company valuation or accounting, living the right values will be the most important challenge for people working in the finance industry.

BBC World Biz Pater Day: Jeremy Grantham
Peter Day talks with the prominent investment manager Jeremy Grantham about managing progress in a world of finite resources.

How A Spanish City Went Boom, Then Bust
This npr news program from 29 January 2013 looks at how the Global Financial Crisis affected the Spanish region of Valencia...

Global Financial Crisis, Financial Contagion, and Emerging Markets
This IMF Working Paper by F. Gulcin Ozkan and D. Filiz Unsal discusses how the recent global financial crisis was the first in recent history that was triggered by problems in the financial system of the mature economies. Existing work on financial crisis in emerging market countries, however, almost exclusively focus on the role of financial frictions in the domestic economy. In contrast, the authors propose a two-country DSGE model to investigate the transmission of a global financial crisis that originates from financial frictions in the rest of the world. They find that the scale of financial spillovers from the global to the domestic economy and trade openness are key determinants of the severity of the financial crisis for the domestic economy. Their results also suggest that the welfare ranking of alternative monetary policy regimes is determined by the degree of financial contagion, the degree of trade openness as well as the scale of foreign currency denominated debt in the domestic economy.

Spring Forward or Fall Back? The Post-Crisis Recovery of Firms
This IMF Working Paper by Leandro Medina studies corporate performance in the aftermath of the global crisis by examining 6,581 manufacturing firms in 48 developed and developing countries in 2010, identifying factors of resilience as well as vulnerability. Based on a cross-sectional analysis, the results show that pre-crisis leverage and short-term debt have had negative effects on the speed of the recovery, while asset tangibility has had positive effects. The negative effect of leverage is non-linear, being particularly strong in firms with high precrisis leverage. Furthermore, the effects are different for advanced and emerging market economies. The paper also shows that the macroeconomic framework critically matters for firm growth. In particular, in countries that have allowed the exchange rate to depreciate, firms have had a faster recovery in sectors highly dependent on trade.

The dog and the frisbee
This speech by Bank of England Executive Director Andrew G Haldane, was presented to “The Changing Policy Landscape” economic policy symposium in Jackson Hole, Wyoming, 31 August 2012. Haldane highlights via back-tested data the inadequacy of complex regulation in the aftermath of the GFC. This actually leads to worse outcomes than more simple "common sense" regulatory rules. This realisation led to the push-back on Basel 2 regulations, which through use of internal risk models in the regulatory framework led to out of control regulatory complexity without actually reducing systemic risk in the global finance system. Through numerous historic anecdotes, Haldane also highlights the important role of market discipline in complementing regulatory rules and supervision.

Five Years of Financial Crisis
In this address to the CPA Australia Finance and Accounting Expo 2012, the RBA's Luci Ellis (Head of Financial Stability Department) discusses where we are - five years on from the beginning of the Global Financial Crises. In his speech he touches on the origins of the crises and the lessons that must be learnt from it.

Sheila Bair Takes on Tim Geithner, Gets Tough on Wall Street in New Book
In this PBS newshour program Judy Woodruff interviews outspoken former head of the Federal Deposit Insurance Corporation (FDIC) Sheila Bair, who thought Timothy Geithner was not nearly tough enough to demand conditions on the big banks or financial institutions who were getting government help. Her new book "Bull by the Horns" is an insider account of the turbulent time of the GFC. In it, the former head of the FDIC calls out Geithner repeatedly (at one point referring to him as "bailouter-in-chief") and has more than a few harsh words for some of Wall Street's key executives at the time, including the departed head of Citigroup, Vikram Pandit.

The fiscal cliff round table
On this PBS "Need to know" program from 12 October 2012 a panel of experts discuss how to avoid taxmageddon, including economist Douglas Holtz-Eakin, a former Director of the Congressional Budget Office, former four-term Oklahoma Senator Don Nickles, former Clinton Administration official Bo Cutter and Maya Rockeymore, Chair of the National Committee to Preserve Social Security and Medicare.

Four Years After Bailouts, Banks Have Bounced Back, Still Making Risky Bets
This PBS NewsHour program from 14 September 2012 examines the risk large banks still represent to the economy today, as well as the problem of banks being "too large to fail" has still not been addressed. Ironically, GFC bailout programs might have exacerbated the problem.

San Francisco Federal Reserve Bank: Asia’s Role in the Post-Crisis Global Economy
In the wake of the global financial crisis of 2007–08, Asia has emerged as a pillar of financial stability and economic growth. A recent San Francisco Federal Reserve Bank conference focused on Asia’s changing role in the global economy. Asia’s relative strength is allowing it to play an expanded part in multilateral responses to the European sovereign debt crisis. And the reforms put in place following the 1997 Asian financial crisis offer models for countries currently trying to stabilize their economies.

Spain is facing mounting market pressure and costly market access, with possibly negative repercussions for the rest of the Europe, amid the longer-term challenge of unwinding imbalances that built up during several years of excess private sector spending. The economy is in the midst of an unprecedented double-dip recession with unemployment already unacceptably high, public debt increasing rapidly, and segments of the financial sector lacking capital and market access. Headwinds from household and corporate deleveraging, combined with unavoidable fiscal consolidation and persistent capital outflows, will likely translate into output contractions this year and next.

Peter Doyle's controversial resignation letter to the Dean of the IMF Executive Board
In his resignation letter from 18 June 2012 senior economist Peter Doyle makes two key criticisms of the IMF. Firstly, he claims the IMF ignored or even suppressed early warning signs of the Global Financial Crisis and secondly he believes the flawed process of appointment of the head of the IMF has disasterous consequences in terms of the culture it breeds throughout the entire organisation.

Spain's Death Spiral
This PBS Newshour report from 23 July 2012 discusses how Spain's debt is spiralling out of control and looks at the impact this is having on the lives of ordinary Spaniards.

The bailout of Spanish banks
In this ABC Lateline interview from 11 June 2012, Emma Alberici internviews Nobel prize-winning behavioural economist Daniel Kahneman to discuss the bailout of Spain's banks.

U.S. Housing Prices on the Rise - Except in Detroit
Given the volatility of monthly data, it is probably too early to start talking about "green shoots", but this PBS Newshour report highlights that other than for Detroit, house prices actually rose in April relative to March across 19 cities in the USA.

A Global Perfect Storm
This Project Syndicate article paints a very gloomy picture for the global economy in 2013. It comes from a well credentialled author: Nouriel Roubini, a professor at NYU’s Stern School of Business and Chairman of Roubini Global Economics, who was one of the few economists to predict the recent global financial crisis.

Europe, Greece 'need to pool strengths'
In this ABC Lateline program, Emma Alberici discusses with former Greek prime minister George Papandreau the need for Greece to have greater integration into Europe.

Paul Krugman: Greece will leave the euro
Nobel Prize winning economist Paul Krugman says Greece will have to leave the euro. Speaking to BBC HARDtalk's Sarah Montague he says there was no alternative but whoever makes the decision for Greece to go would simultaneously be ending their own political career.

Exit Greece
In this SBS Insight program, Jenny Brockie crosses live to Greece, Germany and elsewhere in Europe, bringing in politicians, economists and ordinary citizens to talk about the state of play, whether the tough economic medicine is the right approach, and whether the backlash in Greece could spread to other countries.

Greece 'can do better' than German deal
In this ABC Lateline program, Emma Alberici is joined by Greek MP Euclid Tsakalotos to discuss the policies of the left aimed at reforming the economy of the troubled country.

We Built This City on Debt 'n' Entitlements: Stockton Faces Bankruptcy Threat
As cities across the USA increasingly become mired in financial crises due to pensions, health care costs, debt and overspending, PBS NewsHour correspondent Spencer Michels profiles one city making efforts to avoid bankruptcy: Stockton, California.

ABC - Four Corners: Dicing with Debt - Ireland
This story by Marian Wilkinson and Mary Ann Jolle that is presented by Kerry O'Brien details a private sector debt binge and bailout in one of Europe's smallest countries, that still has the capacity to spark another round of financial panic across the globe.

SBS - Dateline: Pain in Spain?
The financial crisis in Europe is hitting Spain particularly hard, with youth unemployment pushing 50% and hundreds of evictions every day of people who can no longer afford their mortgage repayments.

In this SBS Dalteline feature, David O’Shea travels across the country to get a personal insight from the people affected by the economic downturn. With five million out of work, unemployment benefits only paid for the first two years and property prices plummeting, David finds a country consumed by the crisis. While some are fighting back with noisy protests, others are quitting completely, leaving the country with a ‘brain drain’ of highly qualified workers. Economists say that Spain is ‘too big to fail and too big to bail’, so who will help the country out of its crisis?

BBC News - Greece: Dangerous precedent?
In this BBC News article from 21st February 2012, business editor Robert Peston muses about the Greek debt crisis on his way to Rome.

BBC - Podcasts - Peter Day's World of Business
The Euro crisis is having far reaching ramifications well beyond the shores of Greece. BBC reporter Peter Day visits Spain and Poland to see how both economies are dealing with the Euro zone crisis.

Europe’s Financial Contagion
This 2011 The Washington Post article contains interactive diagrams which illustrate both the banking and trading relationships as a % of GDP for the main players of the European financial crisis.

Ireland's Future Depends on Breaking Free from Bailout
In this opinion piece, Economics Professor Morgan Kelly from the University College Dublin analyses what led to the bailout of the Irish State and the role played by the individuals as well as institutions such as the IMF and European Central Bank.

Corporate and Household Debt Distress in Latvia: Strengthening the Incentives for Market-Based Approach to Debt Resolution
In this 2011 International Monetary Fund Working Paper, Economist and former member of the Board and Chief Executive Director of the Czech National Bank, Michaela Erbenova et al. examine how Latvia has addressed its debt crisis and to what extent it might serve as an example to other nations with limited financial resources. 

Debt Dilution and Sovereign Default Risk
In this 2011 International Monetary Fund Working Paper, Economist Juan Carlos Hatchondo et al. highlight the importance of sovereigns eliminating debt dilution - i.e. decreasing the value of debt issued in the past by issuing new debt. Their research shows that debt dilution accounts for 86% of the default risk and while a reduction in the face value of debt in itself reduces the risk of default, the most important effect on default risk results from a shift in the government's set of borrowing opportunities.  

Sovereign Rating News and Financial Markets Spillovers: Evidence from the European Debt Crisis
In this 2011 International Monetary Fund Working Paper, Economist Rabah Arezki et al. examine the impact on financial markets from sovereign rating news. Perhaps not surprisingly, they find evidence that downgrades to near speculative ratings for economies such as Greece have systematic spill over effects across Euro zone countries. 

How The Recession Has Changed Us
This 2011 chart from "The Atlantic" magazine shows how the profile of the USA economy and society overall has changed during the recession that lasted just 18 months between December 2007 and June 2009.

Sovereign Default Risk Premia, Fiscal Limits and Fiscal Policy
In this 2010 Bank of Canada Working Paper, Senior Analyst and Economist Huixin Bi examine the correlation between government debt levels and default risk premia for developed countries with different sovereign credit ratings. 

Are Financial Crises Alike?
In this 2010 International Monetary Fund Working Paper, Mardi Dungey et al. examine different financial crises and how in each instance the contagion propagates through markets. Under different sets of modelling assumptions, they find that all financial crises were alike.

3 Scenarios for the Greek Debt Crisis
This "The Atlantic" article examines the three fundamental options Greece has for dealing with its debt crisis.

Wall Street on the Tundra
In this disturbing 2009 Vanity Fair article, Economist, Author, Financial Journalist and Contributing Editor of Vanity Fair Magazine, Michael Lewis looks at what happened in Iceland just prior to the Global Financial Crisis, when this country of 300,000 citizens saw what was described as "the most rapid expansion of a banking system in the history of mankind", that has left the country with debts of 850% of GDP.

The Decline of Western Civilisation
In this BBC Interview Peter Day discusses the implications of the Global Financial Crisis with Harvard University Professor, historian and author, Niall Ferguson.

Beware of Greeks Bearing Bonds
In this Vanity Fair article, Economist, Author, Financial Journalist and Contributing Editor of Vanity Fair Magazine, Michael Lewis explores the repercussions of the Global Financial Crisis through the prism of the shenanigans that occurred at the Vatopaidi monastery.

Charlie Munger: Boom and Bust is Normal
BBC interview in which a very wise and sanguine Charlie Munger sees the Global Financial Crisis as the natural outworking of the capitalist system.

Evan Davis talks to Warren Buffett
Another insight into the Global Financial Crisis, human nature and investing, from the Oracle from Omaha.
The Aftermath of the Financial Crisis
In this 2008 paper, Carmen M. Reinhart (Economist with the School of Public Policy and Department of Economics at the University of Maryland) and co-author Kenneth S. Rogoff (Economist at the Economics Department of Harvard University) examine timelines on various key economic indicators such as house and equity prices, unemployment rates, GDP and public debt levels following various historic financial crises.