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Erschienen in:
2011 | OriginalPaper | Buchkapitel
How Did We Get There?
verfasst von : Marco Annunziata
Erschienen in: The Economics of the Financial Crisis
Verlag: Palgrave Macmillan UK
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In hindsight, it is all too obvious that the Great Modération was in fact a “Great Delusion”; however, even with the benefit of hindsight, we have not yet reached a consensus on how we got ourselves into such a huge mess, and on whether and how it might have been avoided. One thing that seems clear is that the Great Moderation had sown the seeds of its own self-destruction. The combination of low inflation, low interest rates, low volatility and high leverage gave the illusion that risk had been eliminated and set the stage for yield hunting via financial engineering. There are two main competing theories as to how these conditions were created: by the Fed or by globalization.