How Can We Protect Economies From Financial Crisis?

The growth recovery has not completely concealed the nightmare of the economic crisis. The financial crisis of 2008 reminded us of the dangers of exaggerated deregulation. The fact that national economies depend on each other, the contagion due to the lack of liquid assets and the “domino” effect of the stock markets’ crashes should encourage us to be cautious. Nevertheless, we need to take into account not only the negative effects on investments if the control of the banking and financial system is too strict, but more generally the numerous benefits reaped if one accepts a certain level of risk. How then can we define an optimal balance point?

The characteristic instability of the securities market is not the only triggering factor. The volatility of the exchange rates and the price of raw materials have a direct impact on the balance of trade of each country. Can we then protect ourselves against economic crises generated by exogenous shocks?

Cyclicity in the economy has been highlighted at different intervals. Crises are also endogenous to our economies, and consequently, cannot be avoided.  The abilitiy of economic stakeholders to anticipate these crises would, therefore, be particularly useful. Too much optimism can lead to over-investment, whereas an atmosphere of mistrust could discourage investment on a long-term basis. Can we therefore identify the beginnings of a crisis? Are economic crises mechanically determined? How can we mitigate them without aiming for a peace of mind which would hinder any initiative?