The Coming Meta-Boom and Meta-Bust -- One Top Economist's View Part 2 of 2
Episode Description
Simon Johnson, a former chief economist for the International Monetary Fund and author of 13 Bankers: The Wall Street Takeover and the Next Financial Meltdown, says the recently passed Dodd-Frank Financial Reform Act does little to prevent the biggest financial risk of our time: banks that are becoming "Too Big to Save," either because potential losses could overwhelm government resources or the public will refuse to sanction another large bailout. Either way, the world economy could crash once again. But preceding any crash, watch for a worldwide "meta-boom." Knowledge@Wharton discussed this and several others issues with Johnson, including how shrinking down big banks could ward off financial meltdowns, Ireland's solvency-threatening debt burden and the implications of Basel III.
Brief Summary
The episode critiques the financial sector's influence on government and media, emphasizing the need for reform and public awareness.
Key points
- The Financial Sector's Grip. The financial services industry’s hold on government is likened to Third World oligarchs.
- The Need for Change. Public perception must shift to enable leaders to enact necessary reforms.
- The Dangers of Big Banks. The concentration of power in six large banks poses significant risks to the economy.
- Regulatory Capture Explained. Regulatory capture is a phenomenon where industries manipulate regulators to serve their interests.
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Episode highlights
- The Financial Sector's GripThe financial services industry’s hold on government is likened to Third World oligarchs.“The hold of the financial services industry on government... would not be broken.”0:26Oct 12, 2010
- The Need for ChangePublic perception must shift to enable leaders to enact necessary reforms.“It’s a combination of events... and a leader who sees the moment.”5:17Oct 12, 2010
- The Dangers of Big BanksThe concentration of power in six large banks poses significant risks to the economy.“Those six banks control... roughly 63% of GDP right now.”6:49Oct 12, 2010
- Regulatory Capture ExplainedRegulatory capture is a phenomenon where industries manipulate regulators to serve their interests.“Regulatory capture is an idea that doesn’t come from the left.”9:32Oct 12, 2010
