Liberalism in Crisis?
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Liberalism in Crisis?

European Economic Governance in the Age of Turbulence

Edited by Carlo Secchi and Antonio Villafranca

During the current economic crisis recurring questions on the validity of the liberal economic system have resurfaced concerning the role of the state and the free market, the proactive use of fiscal policies, economic nationalism, and environmental sustainability. However, due to the depth and scope of the crisis new emphasis is being placed on these issues. This book attaches great importance to the specific consequences for the European Union by addressing critical themes surrounding its role in the new era of global economic governance. These include the coherence of common monetary policy with national fiscal policies, new financial regulation and supervision, and the future sustainability of national rescue plans and their compatibility with ambitious targets, such as those addressing climate change.
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Chapter 2: Do We Understand It? Forbidden Questions on the Financial Crisis

Franco Bruni


Franco Bruni* 1. INTRODUCTION The international economic crisis started during the summer of 2007 (Gorton 2008) in a specific section of the US financial markets and then spread rapidly everywhere in the financial world and in the global real economy.1 The desire to understand with precision its causes and consequences is still premature. Reflections, plans and deliberations have started, in an effort to render the world economy more resilient and to prevent new crises, by correcting the rules, the institutions and the behaviours that contributed to the present one. The priority, though, is the immediate cure of the current turmoil. Financial authorities and operators, politicians and academic economists are still trying to better understand what is happening and where the heart of the problem is. To contribute a stimulus to this understanding, this chapter briefly discusses some specific issues. The idea is more to stress questions than to elaborate the answers. In fact, questions are posed that can be called ‘forbidden’. They are forbidden for at least three reasons: because it still looks impossible to answer them in a clear-cut way, while they tend to inspire half-baked non-orthodox answers; because they deal with issues and aspects of the crisis that are often ‘left aside’ by the typical discussions on the crisis; and because they reveal weaknesses and uncertainties of some relevant parts of economic and financial theory. * The author is grateful to Charles Goodhart and to the other participants in a workshop of the LSE Financial Regulatory Group for a...

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