Tuesday, October 14, 2008

US Financial Crises -Lessons

I repeat what i wrote on September 18th and even this day it is relevent 

The current market jitters are centred on disturbances in the world's credit markets. Worries about the viability of sub-prime mortgage lending have spread around the financial system, and the central banks have been forced to pump in billions of dollars to oil the wheels of lending.

But what happened in previous financial crises, and what are the lessons for today?

There have been a growing number of financial crises in the world, according to the International Monetary Fund (IMF).

Among the key lessons of previous major financial crises are:

Globalisation has increased the frequency and spread of financial crises, but not necessarily their severity

Early intervention by central banks is more effective in limiting their spread than later moves

It is difficult to tell at the time whether a financial crisis will have broader economic consequences

Regulators often cannot keep up with the pace of financial innovation that may trigger a crisis.

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