Yale University Economics Professor and Nobel Laureate Robert Shiller warns that no amount of regulation can really protect the world from the next financial crisis because human nature is unpredictable.
“The international regulatory framework has changed for the better since 2008, but no such changes can anticipate all the kinds of change in narratives that underlie public animal spirits,” he wrote for Project Syndicate.
“As long as we have an economic system that produces growth by rewarding inspired actors and investors, we will face the risk that adverse talk and stories can suddenly and temporarily overwhelm the inspiration. Regulators must counter the risks implied by structures that are intrinsically destabilizing, as the money market funds were,” he explained.
“But the most urgent regulations will always be time- and context-specific, because narratives change. And how these narratives resonate with the public may once again reveal chinks in our financial armor.”
And Wall Street regulation to be sure will be a crucial pivot of the upcoming election.
Donald Trump has said he is working on a plan that’s "close to a dismantling" of the 2010 Dodd-Frank financial regulation law that came in response to the 2007-2008 financial crisis.
“Much of it is very bad. Much of it gives so much power to the regulators that the bankers are unable to function," Trump told Reuters
about the law.
"Dodd Frank has made it impossible for bankers to function. ... It makes it very hard for bankers to loan money for people to create jobs, for people with businesses to create jobs. And that has to stop. And will there be bad loans made? Yes, but there are bad loans made now with Dodd-Frank, OK, I mean all you have to do is take a look."
"The rules and regulations of Dodd Frank have made it so impossible to carry out business and to, especially with respect to lending to businesses who are going to employ a lot of people. So I'm going to make a statement about it. But Dodd-Frank – I mean there are some things in Dodd-Frank that can stay but overall Dodd-Frank has been very bad."
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