Summary of Coping with a Still-Fragile Global Finance System

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According to economics journalist Martin Wolf, the global financial system stands on shaky ground, despite a plethora of post–financial crisis reforms aimed at propping it up. In this frank interview with Boston Consulting Group chairman Hans-Paul Bürkner, Wolf offers his astute opinion on the enduring weakness of the global financial system. Though always politically neutral, getAbstract appreciates Wolf’s reminder of the importance of remaining alert to future crises. Investors, policy makers and industry professionals ought to prepare themselves accordingly.

About the Speakers

Economics journalist Martin Wolf is the associate editor and chief economics commentator at the Financial Times. Hans-Paul Bürkner is chairman of the Boston Consulting Group.

 

Summary

Despite the spate of reforms that followed the 2008 global financial crisis, economies remain fragile. The financial sector exhibits a leverage ratio of 25-to-1, which leaves little wiggle room to absorb losses. While banks use “intelligent risk management” to skirt that possibility, all financial institutions are equally exposed to the same risks if they all employ similar risk-avoidance models. Should a crash occur, panic would spread quickly once investors and depositors learn that banks don’t have sufficient capital. Moreover, economies are highly leveraged. Governments...


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