Epilogue

Abstract

The financial world is a dangerous place, and has become more so since the mid-1990s. One emerging country crisis followed another, culminating in a near-meltdown in advanced countries after 2007. A complete catastrophe was only averted by the resolute action of central banks, treasuries, and the IMF. Has the shock of this narrow escape been sufficient to jolt the major players in the global financial system to adjust their behavior so drastically that systemic crises will be a thing of the past? Surely not. But much will already have been gained if the frequency and depth of financial firestorms can be reduced. What has become abundantly clear is that financial markets cannot be left largely to their own devices. Both the rational expectations and the efficient market theories, the underpinnings of the light-touch approach to regulation, have been found wanting.¹ The challenge for policymakers is to fix what is broken and prevent future conflagrations as much as possible, while avoiding unduly stifling the operation of financial markets.