Making Money Top economist: The next global crash is inevitable
Aug 12, 2024
In this discussion, Linda Yueh, a Professor of Economics at London Business School and Fellow at Oxford, unpacks the telltale signs of impending global crashes. She examines how emotional factors like FOMO contribute to financial bubbles, drawing parallels to historical downturns such as the dotcom bubble. Yueh also highlights the consequences of the Silicon Valley Bank crisis, the complexities of China’s economy, and the intertwined risks of climate change and economic stability, offering lessons from the past for a resilient future.
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Debt's Role in Crashes
- While exuberance is a common feature of crashes, debt is a key factor that amplifies their severity.
- Borrowing heavily to invest creates vulnerability when bubbles burst, as seen in the dot-com and 2008 housing crises.
FDR's Handling of Great Depression
- FDR restored confidence during the Great Depression by closing banks, assuring people their money was safe.
- This swift action, backed by policy, led to the biggest one-day stock market jump in US history.
Credibility and Confidence
- Credibility is crucial in resolving financial crises; swift action in the first 10 months is vital, according to IMF.
- Building confidence can turn the tide, as seen with Mario Draghi's "whatever it takes" speech during the Euro crisis.