Modern Day Greece's Global Financial Crisis
Rome wasn’t built in a day but over many; in time its historical roots have come to symbolize Western civilization’s most admirable human traits and values of the democratic ethos: hard work, sacrifice for the greater good and cooperation. Today, Rome’s neighboring country Greece is called to mind as the democratic ideal’s counterweight: the modern state of Greece has come to symbolize Western culture’s most human failings by way of its financial collapse. Modern-day Greece’s default must be recognized not as some happenstance event occurring overnight, but the cumulative result of a series of complex and interdependent factors. The sovereign nation’s financial collapse was made possible only by the 2007 global financial crisis originating
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Investors, economists and academics ignored the warning signs of the looming financial crisis during the boom phase, lulled into a false sense of confidence by the relative stability of previous decades. Known as the ‘Great Moderation’, the economic era in the decades leading up to the global financial crisis (1970-2008) left many economists and academics in state of disbelief regarding market volatility and informed incorrect perceptions of risk. The era’s nickname was coined by Federal Reserve Governor Ben Bernanke who, in 2004, claimed that the decline in macroeconomic volatility in recent economic history was attributable to structural changes. He credited improvements in the economy’s ability to absorb shocks to changes in economic institutions, technologies, business practices and other structural features. One author claims that between 2005 and 2007, a mere 12 economists and analysts predicted a recession to be likely (Bezemer 9). This delusion that economic volatility would continue to remain low was based on seemingly empirical evidence from this same period of economic history. This was a dangerously optimistic interpretation, and played a large role in the crisis by informing the severe underestimation of risk. Given the global and historical context, the 2007 financial crisis as a whole questioned the belief that the monetary policy was effective at maintaining
Investors, economists and academics ignored the warning signs of the looming financial crisis during the boom phase, lulled into a false sense of confidence by the relative stability of previous decades. Known as the ‘Great Moderation’, the economic era in the decades leading up to the global financial crisis (1970-2008) left many economists and academics in state of disbelief regarding market volatility and informed incorrect perceptions of risk. The era’s nickname was coined by Federal Reserve Governor Ben Bernanke who, in 2004, claimed that the decline in macroeconomic volatility in recent economic history was attributable to structural changes. He credited improvements in the economy’s ability to absorb shocks to changes in economic institutions, technologies, business practices and other structural features. One author claims that between 2005 and 2007, a mere 12 economists and analysts predicted a recession to be likely (Bezemer 9). This delusion that economic volatility would continue to remain low was based on seemingly empirical evidence from this same period of economic history. This was a dangerously optimistic interpretation, and played a large role in the crisis by informing the severe underestimation of risk. Given the global and historical context, the 2007 financial crisis as a whole questioned the belief that the monetary policy was effective at maintaining