This lecture by Gillian Tett was very
interesting and contained much information regarding the current economic
situation of the world and how it has
changed. According to Tett before 2007, it was apparent that economists did not
rely on politics, yet this has now changed and now politics is vital for
economists. Furthermore the past ways of predicting the future using formulas
and equations will not work as the economic world now constantly fluctuates.
Tett also revealed her theory on the
phases the economic world has gone through. The first of these three main
phases is the Era of Great Moderation which was ongoing until the 2008 crash.
During this time, the future of a country's economy could be very predictable.
Moreover, economists also understood why the word 'credit' comes from the Latin
word 'credere' meaning to trust or believe, as finance without trust does not
work. The next phase Tett described was the Era of Turbulence and that was from
around 2008-2010 when the economic world experienced much change in a very
short time. However, this phase has ended because the current economic climate
is much calmer and not as turbulent, but it is not as relaxed and calm as it
was during the Era of Great Moderation. The last phase which is also the
current one, is the Era of the New Normal, where politics matters greatly for
economists. This is due to the fact that political laws and regulations now
matter so much more than previously thought. For example the Dodd-Frank Act
(US) and the EMIR Regulations (Europe).
Tett also discussed the opinions of
ordinary people during these troubled times. She made an excellent analogy for
the typical confusion people experience when it comes to understanding
economics. Tett related this to the corruption of the Catholic Church in the
1500s. The laity (general public) are given sermons by priests (bank CEOs and
political leaders) in a language they don't understand (financial terms and phrases)
and the Pope (head of ECB) oversees the entire sermon. This analogy is superb
in demonstrating the confusion and in some cases ignorance of the common man in
not understanding financial terms, which leads to them being dazed and
confused, as was the title of Tett's lecture.
To conclude, Gillian Tett's lecture
was very informative in highlighting the problems with the economic world and
analysing these last few years, where the economic climate has been volatile
and unpredictable. She also managed to demonstrate, with relevant examples, the
confusion that surrounds economics and how it is time for us all to 'grow up'
and understand that life can never be predictable. All in all, an excellent
talk, from which much can be understood about the substantial change
surrounding the world of economics.
