What now, finance?

Now that the global financial disturbances of 2007 and 2008 seem to be subsiding, it's interesting to take stock of where we stand, what we have learned, and where we go from here. I was personally unimpressed by many writers in the Financial Times who, I feel, lost their heads in 2007 and 2008. The Economist has a section in the latest issue which impressed me with interesting insights and clear thinking. There is a main piece, and then there are these nice articles in it:

• Securitisation and its flaws
• Managing risk
• Accounting standards
• Paying the banker
• Banking management
• Regulators and the cycle
• Spain's better way
• The future of banking
• The next crisis
• Pots and kettles

While on this subject, see Short-Run Pain, Long-Run Gain: Financial Liberalization and Stock Market Cycles by Graciela Kaminsky and Sergio Schmukler; their abstract says: The views on financial liberalization are quite conflictive. Many argue that it triggers financial bubbles and crises. Others claim that financial liberalization allows markets to function properly and capital to move to its most profitable destination. The empirical evidence on these effects is not robust. This paper constructs a new comprehensive chronology of financial liberalization and shows that a key reason for the inconclusive evidence is that the effects of liberalization are time-varying. Financial liberalization is followed by large booms and busts only in the short run. In the long run institutions improve and financial markets tend to stabilize.