FT’s Martin Wolf Discusses Long Shadow of Financial Crisis

Several years on, the effects of the 2007-08 financial crisis still linger, says Martin Wolf.

Wolf, who is chief economics commentator at the Financial Times and a global fellow at Columbia University and SIPA, visited SIPA on September 9 to discuss “The Long Goodbye: Why the Global Financial Crisis has Cast Such a Long Shadow.” Dean Merit E. Janow welcomed Wolf and moderated the Q&A session that followed his lecture.

“Perhaps the most important thing about [the crisis] is its shadow,” Wolf said. “We are still very clearly, very unambiguously in the post-crisis era.”

One sign that the aftermath of the crisis persists can be seen in Washington, Wolf said. After keeping U.S. interest rates at nearly zero for seven years, he noted, the Federal Reserve is currently engaged in a very heated debate whether the U.S. economy is ready for higher interest rates.

Wolf also said China finds itself where the United States was a few years ago, and predicted the Chinese government will soon cut interest rates to nearly zero.

In his prepared remarks and reponse to questions from the audience, Wolf shared insights into the causes of the crisis, lessons learned, and policy implications today.

He suggested, for example, that developed countries had responded to the crisis by pursuing unprecedented monetary policies that generated little growth, and argued that governments should have instead been more aggressive with financial policy and restructuring debt.

Wolf made three policy suggestions for future crises: raise the inflation target, have a target for nominal GDP, and use “helicopter money,” meaning that governments give out cash to citizens through its central bank.

When Wolf visited SIPA last fall, he discussed his then new book, The Shifts and the Shocks: What We've Learned-and Have Still to Learn-from the Financial Crisis (Penguin, 2014). He said the September 9 talk expands upon a new afterword that will appear in the paperback edition, which is scheduled for release this November.

— Kristen Grennan MPA ’16