This fall marks the fifth year past the great financial crash of 2008, which plunged the economy into the worst recession in 70 years. Looking back, what lessons have we learned? N.C. State University economist Mike Walden responds.
“Well, I think the lessons are really questions, and they’re really big questions. And unfortunately, economists and policy makers really haven’t decided on the answers.
“I think the first big question is, are financial crises simply a possible consequence of our economic system? That is, are they going to happen regardless of what we do? And some economists say, yes, they’re part of the capitalist system where we go through periods of optimism and then through periods of pessimism.
“So you’ll get a lot of loan creation. And then you’ll get people going back on their loans, and that’s going to cause a crash. Other people say, no, there’s no need for that, that we have to have reasonable policies to deal with that and prevent those.
“And that actually leads to the second question. Can we make rules and regulations that will either cure these financial crises or actually prevent them? And again, we’ve got people who say, yes we can. Some of those people, for example, were behind the Dodd-Frank financial regulation bill. Others say, no, it’s futile. This is the system that we live with. The best that we can do is have some tools available that when we have these crashes that we can perhaps use those tools to make the crash less severe.
“So I think we’re still left with those same fundamental questions. And these are questions that we may never have definitive answers to.”