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The Great Leveraging

In: The Social Value of the Financial Sector Too Big to Fail or Just Too Big?

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  • Alan M. Taylor

    (University of California, Davis, USA and National Bureau of Economic Research, USA and Center for Economic Policy Research, UK)

Abstract

The following sections are included:The Great Leveraging: Five Facts and Five Lessons for PolicymakersFact 1. Crises: Almost Forgotten, Now They’re BackFact 2. Consequences: Crises are Depressing and DeflationaryFact 3. Extreme Leverage: Size of the Banking Sector Is UnprecedentedFact 4. Global Asymmetry: EMs Buy Insurance, DMs Sell ItFact 5. Savings Glut: Short-Run Panic versus Long-Run DemographySumming Up the Facts: What Is Happening?Lesson 1: Past Private Credit Growth Does Contain Valuable Predictive Information About Likelihood of a CrisisLesson 2: As Symptoms of Financial Crises, External Imbalances Are a Distraction, and so Are Public DebtsLesson 3: After a Credit Boom, Expect a More Painful “Normal Recession” as Well as a More Painful “Financial Crisis Recession”Lesson 4: In a Financial Crisis with Large Run-Up in Private Sector Credit, Mark Down Growth/Inflation MoreLesson 5: In a Financial Crisis with Large Public Debt, and Large Run-up in Private Sector Credit Mark Down your Forecast Even MoreSumming Up: What Next for Macroeconomics and Policy?References

Suggested Citation

  • Alan M. Taylor, 2013. "The Great Leveraging," World Scientific Book Chapters, in: Viral V Acharya & Thorsten Beck & Douglas D Evanoff & George G Kaufman & Richard Portes (ed.), The Social Value of the Financial Sector Too Big to Fail or Just Too Big?, chapter 4, pages 33-65, World Scientific Publishing Co. Pte. Ltd..
    • Handle: RePEc:wsi:wschap:9789814520294_0004
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    More about this item

    Keywords

    Depository Institutions; Banks; Too-Big-to-Fail; Financial Innovations;
    All these keywords.

    JEL classification:

    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
    • N1 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations
    • N2 - Economic History - - Financial Markets and Institutions

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