Where have all the good times gone?
On 14 October, four members of London Business School's economics faculty shared their perspectives on 'The World Economy: Where have all the good times gone?'
Professor Hélène Rey outlined the causes of the financial crisis. She described a series of macroeconomic factors, starting with the abolition of the Glass-Steagall Act in the US which accelerated the move of commercial banks into more risky investments.
Reviewing the impact of actions taken in recent days, Professor Richard Portes said that what happens now will depend on the reactions of people such as those in the audience. "This is fundamentally a crisis of confidence", he said, "and if confidence is not restored by these measures we are still in deep trouble."
Continuing the focus on the real economy, Professor Lucrezia Reichlin said there was a lot of uncertainty in the economic outlook. Forecasts have been revised downwards but it is not certain that a recession is around the corner.
Professor Andrew Scott concluded the formal proceedings by looking at the longer term outlook and predicted a greater emphasis on behavioural finance and attempts to create countercyclical leverage controls He suggested that, in due course, we would look back on the NICE decade (non-inflationary, consistently expanding) as a golden age when the forces of better central banking, globalisation and technology kept inflation and, in turn, interest rates low. A consensus is emerging that we are near the beginning of the end of the financial crisis. "But we are near the end of the beginning of a macro crisis", he said.
The evening concluded with an animated question and answer session.
View the highlights of the event