How can we avoid a similar crisis in the future?
After a period of relative inactivity in the press, the chairman of the Federal Reserve has today suggested a number of solutions to ensure that we do not encounter any similar economic situations in the future. Ben Bernanke, chairman of the Federal Reserve has suggested that:-
1. The size and power of any one or any group of financial institutions needs to be monitored to ensure that the "too big to fail" philosophy is not repeated. We have seen the likes of AIG and other well-known financial institutions collapse and cause severe tremors around the worldwide investment markets.
2. Financial rules and conventions need to be updated and closer monitoring of trading, payments and clearing systems to give the worldwide financial markets a solid backbone.
3. Regulations and accounting policies also need to be updated which could see a number of regulators around the world either amalgamated with other operations in their jurisdiction or replaced outright. Whether we see the introduction of a worldwide regulator very much remains to be seen as there would be too much scope for disagreement.
4. The creation of an authority to monitor and address systemic risk, which has been very much at the heart of the ongoing economic downturn. Even though a number of economic analysts voiced concerns regarding the increased systemic risk in the years prior to the collapse of the worldwide economy they were very much in the minority and often ignored or drowned out.
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