How to avoid the next financial crisis?
49,270 views |
MICHEL GIRARDIN |
TEDxGeneva
• November 2019
Over the last 6 centuries, financial
crises occur for almost always the
same reason: we increase our
debts to unsustainable levels, be
it in the government, corporate or
households sectors.
The problem is that no financial
institution is willing to tackle
credit bubbles before they burst
into severe recessions. Central
Banks are only ready to intervene
once financial crises take place
rather than prior to them. Their
main justification for doing so lies
in the difficulty of measuring excessive
indebtedness. The problem
is that there is no guarantee
whatsoever that the massive
liquidity injections by the Central
Banks post financial crisis will
be effective in jumpstarting the
economies away from recession.
Detecting bubbles is no easy task
but not an impossible one. In this
talk, I show some simple measures
to assert whether debt has
indeed become unsustainable.