Newsweek economics editor Daniel Gross moderated the opening session of the "Globes" Israel Business Conference this morning, and spoke about the US and global economies following the financial crisis of late 2008. His initial words were in Hebrew, having spent a year in Israel as a child, though he switched back to English for his economic overview.
"There was an era of reckless lending. Governments made mistakes, but it was mostly the private sector. There are those who say that the crisis was caused by 'the least of us' subprime borrowers but it was really caused by 'the best of us'. The financial industry thought they could take any risk and sell it."
Gross continued to recall the moments of crisis when Lehman Brothers collapsed, after intensive US government efforts with AIG and Fannie Mae (FNMA). "September 15, 2008, will turn out to be more important economically than September 11, 2001," said Gross, because that was when the idea that the global economy had decoupled from the US was broken.
Gross is now optimistic about the US economy, and thinks that jobs will be created faster than expected in the US. Noting that not everyone agrees with his assessment, Gross explained that just like there is "excessive optimism at the height" of a bubble, there is also "excessive pessimism at the bottom", when the situation is set to improve. He pointed out that while about 130 banks have closed in the recession and its aftermath, about a year ago people expected much worse.
Published by Globes [online], Israel business news - www.globes-online.com - on December 13, 2009
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