The financial crisis of 2007-2008 was perhaps the most dangerous moment, not just in the history of the U.S. economy, but in the history of the Western world. Ten years later we can still feel its reverberations. Historian Adam Tooze discussed the causes of the crisis and the political, economic, and financial implications for the present and the future of the U.S. and world economy.
The narrative of the financial markets broke during the 2008 crisis, and according to Tooze, there has been no clear replacement for that narrative. Indeed, over the past 10+ years, the world has been living with “radical uncertainty.” Adam Tooze set forth three questions to the audience during his talk and provided comments in response to each:
- Why didn’t the world see the 2008 crisis coming? Prior to the 2008 crisis all eyes were on the large U.S. debt levels held by China, but instead, the private economy crashed. The piercing of the real estate bubble and the impact on financial institutions was the most prominent manifestation of the crash.
- Does the world understand how much worse the crisis could have been? After the financial implosion of the trans-Atlantic banking system, it was the leadership by the United States Federal Reserve, acting as the lender of last resort for the global financial community, that avoided a much greater meltdown, (Tooze made a comparison to the Cuban missile crisis of 1962, as another moment that could have been utterly disastrous.)
- What are the consequences of the 2008 crisis and the “broken narrative?” There has been a divergence as the U.S. has made a more robust recovery while Europe continues to struggle. Uncertainty is the rule as Europe is caught between Russia and the U.S. and it is not clear if China will converge economically with the West. As such, the threat of further financial disruption is real.
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