Who was more wrong in the run-up to the financial crisis of 2008: the Federal Reserve or Moody’s Investors Service? This isn’t an academic question; both organizations are still hugely relevant to shaping the way we see our financial system and the risks it contains. And both are now apparently underestimating the dangers again.
Anyone who remembers the collapse of Lehman Brothers Holdings Inc. little more than five years ago knows what a global financial disaster is. A U.S. government default, just weeks away if Congress fails to raise the debt ceiling as it now threatens to do, will be an economic calamity like none the world has ever seen.
As Group of 20 nations look to China to underpin global growth, the Chinese anticipate their economy slowing, said Simon Johnson, a professor of finance at Massachusetts Institute of Technology’s Sloan School of Management.
Japanese Prime Minister Shinzo Abe’s policies to stem deflation and spur growth won’t be a “magic bullet” that shakes the nation’s economy out of stagnation, said Simon Johnson of the Massachusetts Institute of Technology.