Conclusions and Perspectives

As we have largely argued, it seems inappropriate to look at this global financial crisis as an isolated crisis, as implied in a view à la ‘Black Swan’ (Taleb, 2007). On the contrary, as Reinhart and Rogoff (2008, 2009) argue convincingly, this crisis is similar to the financial instability crises that happened in past decades, such as the asset bubble followed by the debt-deflation crisis of Japan in the 1990s. To some extent, this crisis resembles also the systemic crises of the emerging economies across the 1990s and the beginning of the new millennium (Mexico 1994; East Asia 1997; Russia 1998; Argentina and Turkey 2001). Those crises were interpreted along the paradigm of the twin crises (Kaminsky and Reinhart, 1999). The chief difference with respect to those is that the Great Crisis of 2007–09 started at (and hit) the centre of the world’s financial system, rather than its periphery, and excess debt was denominated in the domestic currency (the US$) rather than in a foreign hard currency. As such it seems to need re-regulation as a condition to finding a proper solution. According to various observers (e.g. Eichengreen, 2008a, 2008b, 2009; Wolf, 2008), the international financial system became increasingly inconsistent and instability-prone as it progressively abandoned the gold exchange standard (1971) and then, via deregulation and financial liberalization through much of the 1980s and 1990s, became weakly regulated/supervised at both the national and global levels.