GLOBAL ECONOMIC TRENDS
TIM COHEN: World rode the last great recession well, at the cost of the social contract
A decade after the international economic catastrophe, analysts are still trying to take stock of its impact
It has been a decade since the start of the last great recession. What has happened to the world since then? How did it affect SA? The widespread answer to these questions is bewilderment. Explanations vary. Experts differ. Even the cause of the sudden financial crisis that sent the world spinning into a long, tortuous recession in 2008 remains somewhat opaque. In all the retrospectives published over the past 10 years, the proximate cause of the crisis was often blamed on investment banks slicing and dicing large portions of their debtors’ books and reselling that risk as well, ironically, to each other. The iconic feature of the crisis was an opaque financial instrument called collateralised debt obligations — a collection of debts mainly in the property markets that were merged into large bundles, notionally in order to reduce the risk. But instead, their opacity and ubiquity increased it. This is why one of the smallest and the riskiest of the New York investment banks, Lehman B...
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