Globalization and evolving nature of financial crises
Globalization and evolving nature of financial crises

Summary/Abstract: The shift from an unprecedented period of remarkably high growth rates across almost all countries in 2001-07 to the first harmonized bust since the Great Depression of the 1930s took most observers by surprise. Popular commentary during the boom years stressed a ―decoupling‖ of the world economy from the US, suggesting that the engine of global growth had moved to the ―BRIC‖ (Brazil, Russia, India, and China) countries and East Asia. The crisis that began in the US in late 2007 has quietly put to rest this notion. The 21st Century boom also contributed to the development of a conviction among policy makers and some economists that we had both the expertise and tools necessary to prevent even mild economic downturns. The current crisis has proved this wrong as well: capitalism is not yet immune to the boom-bust pattern. Indeed, financial markets, the inner engine of capitalist development, are inherently prone to crises. Three forces operating in financial markets amplify the instabilities that make controlling this process difficult.

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