10 Years After the Global Financial Crisis

10 Lessons to Learn.



Speed Read

  • With the 10th anniversary of the collapse of Lehman Brothers upon us, it is instructive to look back over the period and ask ourselves what, if anything, we have learned from living through these exceptional events. As is often the case, actual new lessons to be learned may be few, but there are some valuable older lessons to be relearned.

  • Lessons to learn

     The Crisis     

Lesson 1: Credit cycles are inevitable

Lesson 2: The financial system is based on confidence, not numbers

Lesson 3: Managing and controlling risk is a nearly impossible task

     The Reaction    

Lesson 4: Don't panic!

Lesson 5: Some banks are too big to be allowed to fail

     The Aftermath      

Lesson 6: Emergency and extraordinary policies work!

Lesson 7: If massive amounts of liquidity are being pumped into the financial system, asset price will surely rise

Lesson 8: If short-term rates are kept at extraordinarily low levels for a long period of time, yields on other assets will eventually fail in sympathy 

Lesson 9: Extraordinary and untried policies have unexpected outcomes

Lesson 10: The behaviour of securities markets does not conform to expectations

     Thoughts From a Peek Into the Future   

Thought 1: The next crisis will undoubtedly be different from the last - they always are

Thought 2: Don't depend on regulator preventing future crises

Thought 3: The outlook for monetary policy is unknown

     So what now?   

Action 1: Don't abandon diversification

Action 2: Be dynamic!

Action 3: Don't abandon active management

12 October 2018