There’s no end in sight, it seems, to the financial crisis that started last summer. But how bad is it and what can we do to prevent another one? Prospect assembled a panel of top financial experts, including renowned investor George Soros, economic pundits Anatole Kaletsky and Martin Wolf, and Bank of England deputy governor John Gieve to discuss these questions. It considered who was to blame for the crisis, how much worse it may get, and how we can avoid asset bubbles blowing up in future.
The shock phase of the crisis may now be past, but the panel were sceptical about an early recovery, fearing that the conjunction of a banking crisis and a commodity boom may lead to stagflation (where growth slows while inflation rises) and this could cause a serious shock in the real economy. The financial authorities came in for some stick about the way the crisis was handled, and for being too slow to spot the dangers. Gieve, who was in charge of financial stability at the Bank of England (he has since announced he’s going to leave the post early), admitted the authorities would in future have to be far more intrusive in the way they regulated the financial system. Even poking around in banker’s pay packets (how much, and are they being paid in the right way?) is now something the watchdogs are thinking about.