Inaugural lecture 2014-2015

Inaugural lecture: What led to the crisis?  
What led to the crisis?
“The origin of the financial crisis is clearly associated with excessive growth in housing prices in many countries, particularly the United Kingdom, the USA, Ireland, and Spain as well.”

“This is also accompanied by very strong growth in credit, which leads both families and companies linked to the real estate sector – developers and builders – to take on a lot of debt.”

“Insofar as rising house prices aren’t justified by fundamentals, there comes a point where they stop increasing and in fact begin to fall.”
“This brings about a situation of tight liquidity and insolvency, or near insolvency, on the part of financial institutions. They need recapitalization, a reduction of credit, and this leads to a decrease in aggregate demand, a drop in economic activity, and a decline in employment. So we end up with a truly vicious circle, because the fall in employment leads to an even greater drop in consumption, aggregate demand, etc.”