This Banking Crisis Won’t Wreck the Economy
One reason for relative optimism is that the world, and policymakers, have been preparing for this scenario for some time.
The banking industry is going through some things.
Photographer: Justin Sullivan/Getty Images
With the regulatory resolution of Silicon Valley Bank, the forced sale of Credit Suisse Group AG and reports of other troubles at regional US banks, the question arises whether America or perhaps the broader world will go through another major financial crisis and “Great Recession.” Fortunately, the answer so far appears to be no.
One reason for (relative) optimism is simply that the world, and policymakers, have been preparing for this scenario for some time. Not only do memories of 2008-2009 remain fresh, but we are coming out of a pandemic that in macroeconomic terms induced unprecedented policy reactions in most countries. Before 2008, in contrast, macroeconomic peace had reigned and there was common talk of “ the great moderation,” meaning that the business cycle might be a thing of the past. We now know that view is absurdly wrong.