A pdf version of this post is available Ten Years on – my Monday Column
On September 15, 2008, the collapse of Lehman brothers set off a shockwave that rippled out right across the world economy. What can we make of this watershed moment 10 years down the line?
The extent and duration of the shock that hit the world economy are still impressive even 10 years later. Some observers had anticipated the property market’s role in triggering the upheaval, but no-one had envisaged the intensity of the shock or how long it would last.
Between the end of Spring 2007 and Fall 2008, the financial system crumbled astoundingly quickly and astonishingly easily, to an extent that remains unbelievable still to this day. The collapse of Lehman Brothers was the culmination point, coming in the wake of other investment banks’ demise – although these previous casualties had been rescued and taken over by other financial institutions – and its bankruptcy was accepted without taking the full measure of the consequences. It was a step into the unknown, and enough to strike fear into the heart of any economist at the time. Risks quickly emerged as insurer AIG was saved just a few weeks later: Lehman marked the final stage in the breakdown process, as the realization dawned that history was on the brink of a new era. Continue reading