The next global financial crisis and the potential international response.

[All Along The Watchtower]

So the other day, I was listening to a podcast episode from January of last year - I think it was a Brookings Institution podcast of some sort, don’t quote me on that - that centered on a discussion of Obama’s Presidency and ascertaining his successes and failures. In the discussion, one of the participants noted that the immediate international impact of the 2008 financial crisis was greater than that of the 1929 crash, and that the Great Depression (as economists and historians know, at least) was made so much worse within so many countries by *adjusts glasses* retaliatory tariffs and generally aggressive protectionist policies that were implemented by many governments (including the US government).

The upshot of this commentator’s mention of that history was to credit both George W. Bush and Barack Obama for facilitating a massive degree of international cooperation in pulling the global economy away from the brink of what could very well have been considerably more dire consequences than those of 1929. So, in light of, uh, the US government’s current trade policy (??) and an apparent marked decline in international cooperation on a whole host of issues, I humbly ask the Atlas Forum: when the next big crisis comes, do you think the global response will be more like 1929 to the early 1930s, or 2008-2009??

[Sadader]

Good post. This is what I’m worried about with Trump - GWB and Obama were brave enough to do what had to be done, but Trump is much more populist, ignoring the orthodoxy of every economist when it comes to free trade, so if it was him in 2008 then we could easily have been far worse off (eventually he would have had to crater though, I hope), i.e. with him refusing to go for TARP, not just with trade policy.

Poor government response in the 1930s made everything way worse (protectionism, but also things like FDR balancing the f-ing budget halfway through and keeping the New Deal non stimulative). But US government economic institutions as a whole are far better now. so even with a Trump like politician failing to do anything, the Fed should be able to lock it down (but as we saw with GOP budget shenanigans during the recovery, this would be worse than if congress actually got its act together). Things have also improved a significant amount since 2008 (The Fed has tried its apocalypse tools, Financial regulation is better, and collapsing financial institutions can be shut down in an orderly fashion).

Hopefully nothing bad happens under Trump, because I sincerely doubt that he has the Courage to Act^TM, given what we've seen so far.