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The Financial Crisis: Lessons from History

Author

Listed:
  • Brian Grinder

    (Professor of Finance, Eastern Washington University)

  • Robert Sarikas

    (Associate Professor of Accounting, Ohio University)

  • Dean Kiefer

    (Associate Professor of Finance, Eastern Washington University)

  • Arsen Djatej

    (Professor of Accounting, Eastern Washington University)

Abstract

Financial crises have regularly afflicted economies throughout history and the United States has been no exception. This paper examines the Panic of 1907, the Crash of 1929 and the Great Depression and the Great Recession of 2007-08 and discusses the responses of the government and regulators. The short version of the story is that the while the government response has varied in terms of monetary and fiscal policy, the regulatory response has remained essentially the same. The typical reactive regulation sounds good and gives the appearance of accomplishing something but, in fact, only serves to sow the seeds of future crises. The ineffective implementation of existing regulation has had a similar result. Indeed, several authors note that most financial innovation in recent years has its origins in circumventing new regulations. Likewise, government monetary and fiscal responses may or may not help the economy and often give the appearance of great arbitrariness. Our conclusion is that there will be unforeseen financial crises in the future, sweeping regulation and promises of recent politicians notwithstanding. Serious study of the unanticipated consequences of this regulation and the development of more robust risk management systems will help us mitigate the effects of future crises but will be of little assistance when it comes to avoiding them. Developing the analyses and risk management systems requires a detailed study of financial history keep both successes and failures fresh in our collective memory. Key Words:Economy, Great Depression, Recession, History, Risk Management

Suggested Citation

  • Brian Grinder & Robert Sarikas & Dean Kiefer & Arsen Djatej, 2015. "The Financial Crisis: Lessons from History," International Journal of Research in Business and Social Science (2147-4478), Center for the Strategic Studies in Business and Finance, vol. 4(1), pages 01-16, January.
  • Handle: RePEc:rbs:ijbrss:v:4:y:2015:i:1:p:01-16
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    References listed on IDEAS

    as
    1. Reinhart, Karmen & Rogoff, Kenneth, 2009. ""This time is different": panorama of eight centuries of financial crises," Economic Policy, Russian Presidential Academy of National Economy and Public Administration, vol. 1, pages 77-114, March.
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    7. Donaldson, R. Glen, 1993. "Financing banking crises : Lessons from the panic of 1907," Journal of Monetary Economics, Elsevier, vol. 31(1), pages 69-95, February.
    8. C. Lowell Harriss, 1951. "History and Policies of the Home Owners' Loan Corporation," NBER Books, National Bureau of Economic Research, Inc, number harr51-1, September.
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