Into the Abyss
A cascading series of economic/financial crises overwhelm political and policy responses
Against a backdrop of domestic and international political strife—and with economic policy-makers already operating in uncharted territory—the eruption of another global financial crisis could overwhelm political and policy responses. A systemic collapse of the sort that was averted in 2007–2008 could push countries, regions or even the whole world over the edge and into a period of chaos.
If financial systems go down, contemporary economies and societies cannot function. Money would stop circulating. Wages would not be paid. Supply chains would break down. Scarcity would begin to become pervasive, and this would threaten to upend the political and social order. Policy-makers would pull every available lever to restore stability. But what if the prospect of another financial-sector bailout further enflamed societies rather than calming them? Or what if the financial system’s collapse stemmed from a hostile cyberattack, raising fears that more attacks and disruption lie ahead?
More can be done to enhance the resilience of the financial system. Stress-testing methodologies could be strengthened by assigning greater weight to tail events and unexpected consequences. Greater consideration could be given to the growing number of voices calling for radical change of the way the banking system works. But societies might also want to prepare more actively for worst-case scenarios.