The 2007/8 Global Financial Crisis: A Decade On

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The 2007/8 Global Financial Crisis: A Decade On: Abstract

It was 3 February 2018, and Jerome Powell had that day taken over as chairman of the Federal Reserve (the Fed) in the United States of America (US) from his predecessor, Janet Yellen. He did so as nominee of the US president, Donald Trump, and was taking up his position in a financial climate that was pushing back against the regulatory measures which had been imposed after the financial crisis a decade earlier.

Ten years on, both the media and policymakers were starting to speculate on the possibility of another financial crisis occurring. In its China report of August 2017, the International Monetary Fund (IMF) warned: “International experience suggests that China’s growth is on a dangerous trajectory, with increasing risks of a disruptive adjustment and/or a marked growth slowdown.” Governor of the Bank of England, Mark Carney, echoed this view when he warned that the soaring debt-to-gross domestic product (GDP) ratio in China, which had risen to above 300%, was a serious danger. And Reuters financial journalist, Jamie McGeever, cautioned that “despite the ‘normalisation’ underway, there [was] a glaring abnormality that should be flashing red to the Fed and central bankers everywhere: financial conditions [were] easier now than at any point in over 40 years”.

While the general consensus was that the financial system had changed pursuant to 2008, as well as emerging stronger for all the changes that were made, the critical question remained – had it changed enough to prevent the events of 2007/8 repeating themselves?