An exploration of the roots of the current credit crisis in the process of financialisation, where profit-making occurs increasingly through financial channels rather than through trade and commodity production.
This process and the explosion of private financial flows globally helped the United States preserve and establish its pivotal place at the centre of the international financial markets after the collapse of the Bretton Woods arrangements in 1973.
So, in addition to reasserting public control over the credit creation process, the us has to be prepared in case the dollar plunges in value, and focus on how to resume the recycling of trade surpluses before contraction begins to destroy them.
The global monetary standard and thus the integrity of monetary reserves need to be safeguarded, and a recycling of trade surpluses would wean world demand away from its dependence on us overspending without the world getting stuck in a depression.
“September and October of 2008 was the worst financial crisis in global history, including the Great Depression.” Ben Bernanke, then the chair of the U. Federal Reserve, made this remarkable claim in November 2009, just one year after the meltdown.
Looking back today, a decade after the crisis, there is every reason to agree with Bernanke’s assessment: 2008 should serve as a warning of the scale and speed with which global financial crises can unfold in the twenty-first century. and European real estate markets; as housing prices plunged from California to Ireland, homeowners fell behind on their mortgage payments, and lenders soon began to feel the heat.This essay examines the consequences of the global economic and financial crisis for income distribution.It first discusses the distributional background of the crisis, which is followed by an assessment of the impact, again on distribution, in different countries and then outlines the policy implications.Many had already collapsed, and many others would before long.The Great Depression of the 1930s is remembered as the worst economic disaster in modern history—one that resulted in large part from inept policy responses—but it was far less synchronized than the crash in 2008.The financial system may be stable and flush with liquidity through injection, but in the absence of sufficient demand for liquidity from the real economy, the depressive economic conditions may continue.The politics of trying to save capitalism by saving only the financial capitalists may well turn out to be the last twist of the knife from free market fundamentalism to pave the way for a deeper and lasting recession.The turning point was the decision in September 2008 to let Lehman Brothers fail, an event that had a series of ruinous cascading effects.Given the depth of the crisis in the United States and Europe, it was only to be expected that India too would be affected.On the contrary, it fosters a climate that encourages them.While the United States' emphasis on reviving banks and public spending are both important, neither addresses directly the main source of deflation, which is that the global imbalances are no longer being recycled effectively.