The Global Financial Crisis: Some Special Features, Possible Responses

The global financial crisis has now moved from containing the contagion to coping with the global recession. This paper identifies some special characteristics of the current recession. First, it began as a crisis of debt and of asset price inflation. Second, it represents a regulatory crisis. The explosion of complex (and unregulated) financial instruments in a high debt environment exacerbated the crisis of debt. Following immediately from this and, third, it represents a massive imbalance in the global economy and a credit crunch. Forth, it represents a collapse of demand and, following from that rising unemployment. Finally, the rising unemployment exacerbates the debt crisis. This completes a vicious cycle.