The Economist suggests that the world has learned few lessons of the global financial crisis from 2008 to 2009.

Becky Berkman

2018-09-07 07:33:00 Fri ET

The Economist re-evaluates the realistic scenario that the world has learned few lessons of the global financial crisis from 2008 to 2009 over the past decade. Good times breed complacency. As the Trump administration rolls back key Dodd-Frank rules and regulations, the Federal Reserve has yet to raise countercyclical capital buffers for most banks. When prudence prevails, no regulator is a perfect judge of financial risk.

The Economist points out that the current news is both good and bad. The good news suggests that most U.S. large banks finance themselves with proportionately more equity. The average bank equity capital ratio increases substantially from 3% to double digits in the decade after the Lehman financial meltdown.

However, the bad news suggests that most U.S. households, firms, and financial intermediaries react slowly to the U.S. subprime mortgage crisis from 2008 to 2009.

Former U.S. Treasury Secretary and Harvard President Larry Summers shares his ingenious insight that the U.S. economy suffers secular stagnation, government debt, and inflation in the recent decade after the global financial crisis. In light of gradual greenback appreciation and national populism, Harvard chair professor Kenneth Rogoff indicates that the Trump stock market rally may be the calm before the next financial storm.

Despite hefty Trump tax cuts and infrastructure expenditures, the U.S. economy operates near full employment with high inflation, currency, and interest rate risks. This trifecta poses a red alert to the Trump administration and its advisory troika (National Economic Council, Federal Reserve, and Treasury).

Both the U.S. Treasury and National Economic Council favor imposing draconian tariffs on at least $200 trillion Chinese imports. This trade tactic aims to help curtail bilateral trade deficits with China. These tariffs may affect Canada, Europe, Mexico, and Japan.

Moreover, the Federal Reserve accelerates the current interest rate hike (with at least one rate increase in September 2018 and another in December 2018). This hawkish interest rate hike is likely to continue until late-2019. All of these fiscal and monetary measures can help contain the high-risk trifecta of inflation, fiscal debt and deficit, and secular stagnation.

 


If any of our AYA Analytica financial health memos (FHM), blog posts, ebooks, newsletters, and notifications etc, or any other form of online content curation, involves potential copyright concerns, please feel free to contact us at service@ayafintech.network so that we can remove relevant content in response to any such request within a reasonable time frame.

Blog+More

Rakesh Jhunjhunwala is India's equivalent to Warren Buffett in America.

Jonah Whanau

2016-10-19 00:00:00 Wednesday ET

Rakesh Jhunjhunwala is India's equivalent to Warren Buffett in America.

India's equivalent to Warren Buffett in America, Rakesh Jhunjhunwala, offers several key lessons for stock market investors: When the press o

+See More

Our proprietary alpha investment model outperforms most stock market indices from 2017 to 2022.

Peter Prince

2022-02-02 10:33:00 Wednesday ET

Our proprietary alpha investment model outperforms most stock market indices from 2017 to 2022.

Our proprietary alpha investment model outperforms most stock market indices from 2017 to 2022. As of early-January 2023, the U.S. Patent and Trademark O

+See More

Disruptive innovators often apply their 5 major skills in new niche discovery and market share dominance.

James Campbell

2020-05-07 08:26:00 Thursday ET

Disruptive innovators often apply their 5 major skills in new niche discovery and market share dominance.

Disruptive innovators often apply their 5 major pragmatic skills in new blue-ocean niche discovery and market share dominance. Jeff Dyer, Hal Gregersen,

+See More

A 7-year $1.3 billion hedge fund manager Chelsea Brennan shares her investment advice.

Laura Hermes

2018-10-05 10:38:00 Friday ET

A 7-year $1.3 billion hedge fund manager Chelsea Brennan shares her investment advice.

A 7-year $1.3 billion hedge fund manager Chelsea Brennan shares her investment advice. Her advice encompasses several steps toward better financial literacy

+See More

Precautionary-motive and agency reasons for corporate cash management

Monica McNeil

2022-10-05 08:24:00 Wednesday ET

Precautionary-motive and agency reasons for corporate cash management

Precautionary-motive and agency reasons for corporate cash management Bates, Kahle, and Stulz (JF 2009) empirically find that public firms have doubled t

+See More

Michael Woodford provides the theoretical foundations of monetary policy rules in ever more efficient financial markets.

Fiona Sydney

2023-09-07 11:30:00 Thursday ET

Michael Woodford provides the theoretical foundations of monetary policy rules in ever more efficient financial markets.

Michael Woodford provides the theoretical foundations of monetary policy rules in ever more efficient financial markets. Michael Woodford (2003)  

+See More