Starting the course with the GFC was nicely topical. I enjoyed the week because economics is something that I quite frankly know nothing about. After I slogged through all the reading I had a whole arsenal of terms to add to my vocabulary. Such as Leverage, Expansionary US monetary Policy, Efficient Market Hypothesis, Monetary vs Fiscal Policy, Liquidity and Nominal vs. Real.
The GFC seemed to unfold like an earthquake. A series of tremors leading up to a very rapid catastrophe. I remember, while in Vietnam at the beginning of 2008, waking up to CNN reporting a very large and rapid drop in the stock market, the next day the Federal Reserve Bank had readjusted the interest rate and within days the event had disappeared off the news cycle. This was a preface to the major culmination of complex factors that have resulted in what has now been affectionately dubbed The GFC. Renee's suggested reading, particularly David Gruen's Speech to the Sydney Institute and his seven causes for the crises really illuminated the topic for me. It echoed with a quote I came across from this article "The Queen and the perfect bicycle" on Inside Story exploring the value of the discipline of economics.
"AS EVEN the most ardent republican would acknowledge, Queen Elizabeth is not one to make flippant comments about grave matters of public policy. So when, capturing perfectly the mood of public exasperation, she asked an economist why his profession had not seen the crisis coming, it became a serious matter for the British Establishment. The response, which came at the end of July in the form of a letter to Her Majesty from that august institution, the British Academy, suggested that everyone had been doing their individual jobs correctly, but as a group economists had missed the big picture of a “series of interconnected imbalances.” If economists were guilty of anything, the letter suggested, it was “a failure of the collective imagination of many bright people… to understand the risks of the system as a whole.”. Which pairs perfectly with Gruen's statement:financial instruments became so complex that eventually literally no-one understood fully the nature of the instruments they were buying and selling”

The last sentence of that paragraph sums up, not only the GFC, but one of the greater themes of complexity. How the collection of many seemingly correct things can culminate in collapse. The question then arises, Is it necessary for a system to be holistically understood or is it better for people to specialise on parts of knowledge and to collaborate. How do you stabilise when there is too much distance between the various agents of the system for the system to function? Or even as I think back over that statement is it even possible for a system to be holistically understood. The gap between the possibility and impossibility I think is the tipping point between complicated and complex.

Questions: What are the workable alternatives to the free-market system as it was before the GFC? Or will we recover from the crisis and find equilibrium in the existing system?

Is Government regulation a good or necessary thing?