A decade after the financial crisis: economy is incapable of balanced growth
The long-term productivity growth in the real economy suffers a considerable degree from the effects of the financial crisis, according to recent research from the Bank for International Settlements (BIS). At yesterday’s Financial Centre Breakfast, BIS’s chief economist, Claudio Borio, revealed challenges faced by the global economy and actions that must be taken.
Frankfurt Main Finance and the Association of Foreign Banks in Germany hosted the breakfast in the Hessian branch of the Deutsche Bundesbank. The speaker for the event was Claudius Borio, who provided answers to the question why almost a decade after the financial crisis, the global economic system is incapable of returning to sustainable and balanced growth. “The analytical focus is often misaligned, and that is one reason why we are where we are now,” said Borio on situation analyses. He proposed several appropriate measures for dealing with today’s challenges.
The basic prerequisite is that financial cycles not be ignored. This is demonstrated in the results of recent research of BIS: “We have observed that financial cycles have become larger since the 80s. This is, inter alia, due to the financial liberalization and globalization of the real economy. Policymakers have done too little to limit financial upswings. And following the crises too much emphasis was placed on crisis management and too little on sustainable crisis solutions.”
As early as 2003, Borio warned of instability in the global financial system; thus, predicting the financial crisis. Since 1987, he has held various positions at BIS and is regarded as one of the most interesting and provocative economists dealing with monetary policy. In his 2014 publication “The Financial Cycle and Macroeconomics: What have we learned?” he warns of a new financial crisis and makes proposals for a new academic agenda.
The complete presentation of his speech at the Financial Centre Breakfast is available here.