Thursday 26 Nov 2020 | 01:39 | SYDNEY
Thursday 26 Nov 2020 | 01:39 | SYDNEY

The TLA crisis


Mark Thirlwell

16 November 2007 11:58

I have posted a new paper to the international economy section of the Lowy Institute website.  The piece is based on a couple of presentations I gave last month and takes a look at the subprime crisis that has been roiling financial markets this year.

We could call this latest financial accident the Three-Letter Acronym (TLA) crisis, given the abundant deployment of them (CDO, ABS, MBS, SIV) in the description of these events.  The main point I make in the paper is that despite policymakers’ apparent success in taming inflation and output volatility – The Great Moderation – the world economy remains vulnerable to financial crisis.  Indeed, it seems likely that this vulnerability has increased in recent years as a by-product of financial liberalisation. Since the crisis continues to roll on, I suspect there will be more lessons to come.