Question

What – if anything – do you think can be done to prevent a crisis similar to 2008 from happening again? What role might the government have in a solution? What reforms might you suggest?

Answer 1

The so-called "overblown" trade-off between financial stability and economic growth means that by placing higher capital standards on banks, we can have higher stability without losing high levels of bank lending that promotes economic growth.

Second, "the present focus on liquidity conditions is unfounded and derives from the misguided assumption that the financial crisis of 2007-09 was a liquidity crisis." "Instead, it was a situation of insolvency danger that induced liquidity to leave the economy."

Increase capital ratios to make them countercyclical for shadow banks to depository institutions. Remove ratios for liquidity. Increase financial literacy and reduce consumer leverage. Design a more streamlined regulatory framework. Emphasis on bank governance and culture. Because of three reasons, some of these reforms have not yet been introduced: a lingering misconception that this was a liquidity crisis; the lack of political commitment to fix consumer financial awareness concerns (which may blame uninformed consumers making poor personal financial choices for the crisis); and a lack of respect for the position of 'soft' problems such as b

Liquidity regulations are sapping banks' potential growth. The requirement that banks retain a certain amount of tangible assets prohibits them from lending further to businesses and individuals, such as capital, treasury bonds, and so on.

Two forms of strategies, monetary policy and fiscal policy, are used by the U.S. government to affect economic performance. Both serves the same purpose: to help the economy attain prosperity, full employment, and market stabilization. Monetary policy is used to manage the supply of money and interest rates. It is exercised by an autonomous government entity called the Federal Reserve System ('the Fed'), which has the authority to monitor the supply of money and interest rates. If the Fed thinks inflation is an problem, it can monitor the supply of money and interest rates. It will use expansionary policies to raise the money supply to lower interest rates to fight a crisis. Fiscal policy uses the ability of the government to borrow to tax. When the nation is in a recession , the government will boost investment, decrease taxation, or do both to grow the economy . The government will decrease investment or increase taxes, or both, when we are facing inflation.