Brent said: "Specific to the U.S., the private sector has delevered some, some fiscal consolidation has occurred (at the state and federal level - e.g. the federal sequester), and the so-called TBTF financial institutions have improved balanced sheets (e.g. all those excess reserves held at the Fed)."
All these things are true. But.....
The Fed was an active participant in creating the financial crisis (Greenspan vs Brooksley Born on preventing OTC derivatives regulation, Greenspan leverage restricitions on FIs, keeping interest rates too low too long.)
Saving a situation that you largely created from becoming a global meltdown to just a 100 year finanacial crisis is not worth of much praise,imo.
The US policy choice of preserving, rather than nationalizing the TBTF banks, continues to encourage excessive risk taking by these FIs. Credit lending standards are back to 2007 levels in certain areas of commercial lending.TBTF Banks are even bigger now than pre-crisis.
The OTC derivative market remains a dark unregulated market.
The US savings rate remains low, most of the delevearging in the consumer sector has come as a result of bankruptcies. The business sector is actually levering up in an effort to boost ROE.
Much of the state cuts have come out of their education budgets- hardly a formula for future success.
The Fed encouraged too much risk taking and borrowing in the economy, which led to a crisis. Their policy response has been to encourage even more risk taking and borrowinng (by their own admission in several recent meeting notes).
The main policy issues of structural unemployment, corporate tax reform, inequality, have not been addressed in the US.
The likelihood that the last five years will be seen at some point as a pyrrhic victory, and a squandered opportunity with Fed overreach seems pretty high to me. The seeds of the next crisis have been sown by the policy response to the recent one and I think global financial fragility is not much different now than it was in 2007.
All these things are true. But.....
The Fed was an active participant in creating the financial crisis (Greenspan vs Brooksley Born on preventing OTC derivatives regulation, Greenspan leverage restricitions on FIs, keeping interest rates too low too long.)
Saving a situation that you largely created from becoming a global meltdown to just a 100 year finanacial crisis is not worth of much praise,imo.
The US policy choice of preserving, rather than nationalizing the TBTF banks, continues to encourage excessive risk taking by these FIs. Credit lending standards are back to 2007 levels in certain areas of commercial lending.TBTF Banks are even bigger now than pre-crisis.
The OTC derivative market remains a dark unregulated market.
The US savings rate remains low, most of the delevearging in the consumer sector has come as a result of bankruptcies. The business sector is actually levering up in an effort to boost ROE.
Much of the state cuts have come out of their education budgets- hardly a formula for future success.
The Fed encouraged too much risk taking and borrowing in the economy, which led to a crisis. Their policy response has been to encourage even more risk taking and borrowinng (by their own admission in several recent meeting notes).
The main policy issues of structural unemployment, corporate tax reform, inequality, have not been addressed in the US.
The likelihood that the last five years will be seen at some point as a pyrrhic victory, and a squandered opportunity with Fed overreach seems pretty high to me. The seeds of the next crisis have been sown by the policy response to the recent one and I think global financial fragility is not much different now than it was in 2007.
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