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altThe good: banks begin to recover as governments inject liquidity into the system. The bad: the bailout also encourages hedgers to use banks as casinos. The ugly: the bubbles that "burst" the financial system last time have resurfaced. Are we headed for a new financial crisis? 

In this video introducing the latest Trade and Development Report, UNCTAD's Heiner Flassbeck, Director of the Division on Globalization and Development Strategies, outlines the causes of the current financial crisis and sets out the positive measures taken by governments so far to alleviate its effects.

As banks begin to recapitalize after a crisis largely due to speculative activities, their role in the economy comes into question: do they have a utility role, or are they simply hedgers' gambling grounds?

As those who do not study the past are doomed to repeat it, Flassbeck also compares the current and pre-crisis performance of financial markets to make the point that the bubbles that formed then are back.

 "As we have new bubbles, it's only a question of time 'til the new bubbles are going to burst," he says. 

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Use the questions below to guide a discussion with your students, and/or post your views on our forum* (you must be logged in to participate).  

Questions for discussion/forum:

  1. UNCTAD's hypothesis (slide 2) sustains that the current crisis has its origins in the financial markets, rather than in the economy as a whole, and that its causes are not directly related to surplus savings or an over-abundance of money in the system. What are your thoughts?
  2. What positive measures have been taken in your country to deal with the effects of the financial crisis? Have these measures brought lasting changes to "future-proof" against another financial crisis (slide 8)? Or do you agree that an opportunity has been missed (slide 9)?
  3. What is your opinion of China's "anti-crisis" measures (slide 9, 14)? Could they be applied to your country's situation?
  4. What is your view on arguments for strong global governance and regulation? How to deal with limitations on the ability of the World Trade Organization to intervene in hypothetical situations like the one mentioned in slide 13?

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