The Joe Walker Podcast Raghuram Rajan — Debt, Monetary Policy, and Unintended Consequences
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Nov 1, 2023 Raghuram Rajan, Indian economist and Professor of Finance at the University of Chicago, discusses the causes of the global financial crisis, the risks in the financial system, and the challenges of targeting financial stability in monetary policy.
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Financial Sector Risks
- Raghuram Rajan's Jackson Hole speech highlighted risks in the financial sector, anticipating a potential crisis.
- This contrarian view challenged prevailing optimism about financial innovation and deregulation.
Risk Management Suppression
- In 2007, Rajan observed a lack of risk discussion among risk management officers.
- He learned that those who raised concerns about risks had been removed, indicating a systemic issue.
Let Them Eat Credit
- The "Let Them Eat Credit" narrative explains the expansion of credit as a response to stagnant wages and inequality.
- This led to increased borrowing, especially among lower-income groups.