EconPapers    
Economics at your fingertips  
 

Lessons from the Great Recession: Need for a New Paradigm

Salman Ahmed Shaikh ()

MPRA Paper from University Library of Munich, Germany

Abstract: The ongoing sovereign debt crisis in Europe and U.S. is challenging the conventional wisdom and is creating fears of a double dip recession in 2012. Massive levels of debt and consumption beyond means and speedy financial innovation with lax regulation has put major economies in a deep hole. Monetary policy with ease in rates had been ineffective to say the least in generating new jobs in last few years when interest rates were kept at near zero level since 2008 in U.S. Fiscal stimulus again targeted the undisciplined financial sector which did not use the stimulus for extending credit to the private sector as much as was required. With business cycle fluctuations, mounting consumer and fiscal debt is unsustainable and one lesson of the crisis is that business cycles are for real and here to stay. The securitization of consumer debt magnified the losses and created negative unjust effects on savers and taxpayers which had nothing to do with the mess in the first place. In this backdrop, a new paradigm is needed which put the focus back on productive enterprise, brings recovery with job creation, limit and regulate speculative financial institutions and instruments and improve corporate governance by influencing the incentives more deeply and proactively.

Keywords: Great Recession; Great Depression; Financial Crisis; Credit Crunch; Subprime Mortgage Crisis; Housing Market Bubble; Securitization; Leveraging; Shadow Banking (search for similar items in EconPapers)
JEL-codes: E02 E44 E63 (search for similar items in EconPapers)
Date: 2012-02-01
New Economics Papers: this item is included in nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations:

Published in Journal of Economics & International Finance 2.4(6)(2012): pp. 131-136

Downloads: (external link)
https://mpra.ub.uni-muenchen.de/38531/1/MPRA_paper_38531.pdf original version (application/pdf)

Related works:
Journal Article: Lessons from the great recession: need for a new paradigm? (2012) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:38531

Access Statistics for this paper

More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter ().

 
Page updated 2025-03-22
Handle: RePEc:pra:mprapa:38531