The Global Financial Crisis according to Matthew Lynn

Global Financial Crisis Survey

Matthew Lynn is a Financial columnist for WSJ MarketWatch and Money Week, and previously wrote for Bloomberg as well as the Sunday Times in London for ten years. He is the author of Bust: Greece, the Euro and the Sovereign Debt Crisis and The Long Depression: The Slump of 2008 to 2031 .

2. Which narrative presented by Douglas Elliott and Martin Baily of the Brookings Institute in Telling the Narrative of the Financial Crisis: Not Just a Housing Bubble best represents the causes of the Financial Crisis?

Everyone was at fault. Wall Street and the City were greedy, ordinary people were dumb, and the government was complacent. Of the three, however, the government was most at fault. Why? Because the markets will always be greedy, and the investors will always be dumb. The job of government is to structure the market and its regulation so that doesn’t matter.

3. I believe the crisis is ongoing and I project the Global Financial Crisis will end in the year

It will not end until 2031. I’m not entirely serious with that date – but it is meant to be thought-provoking. I have a book out next week called ‘The Long Depression: The Slump of 2008 to 2031 ’ It is based on the idea that this is a re-run of the Long Depression of 1873 to 1896 - which lasted 23 years. It is going to take a long time to fix this and get back to normal growth.

4. What were the primary causes of the Global Financial Crisis?

It was, and still is, primarily a debt crisis. Debt levels have been rising steadily right across the developed world for the last three decades, and by 2008 had reached a point where they were unsustainable. There were two reasons for that build up of debt. One was the severing of the final link between the monetary system and gold in 1971, and the creation of a system of pure fiat money. The second was an intellectual climate created by neo-Keynesian economists who believed debt didn’t matter. That spread to regulators and politicians – and the result was the mess we have now.

5. What still should change as a result of the crisis?

Where do we start! One, Europe needs to bring an end to the euro – the most dysfunctional monetary system ever created. Second, we need to create a new global monetary system based on something other than the dollar. And finally, we need to get our debt – personal, corporate and government – down to manageable levels (by which I mean about 50% of GDP). That is going to be a long hard road.

Compiled by Gary Karz, CFA
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Global Financial Crisis Survey

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