ABSTRACT
The specific characteristics and risks of credit supply were central to the latest financial crisis. The specific forms of risks manifested, combines some novel which are very familiar to think through the required policy response. Three broad categories of policy response can be envisaged. The first approach focuses on parametric reform. The second category of approach focuses on issues relating to the structure of the banking system. The third category of response was macro-prudential. Britain gained an economic advantage from increased financial intensity and sophistications. Ratchet effect reinforces the vital importance of policies which prevent the build-up of excessive debt in the first place. The history of financial systems and financial markets has a crucial role to play in our economics work. The greatest benefit in financial crisis was that economists and economic historians had thought the Great Depression, turns financial crisis into economic and political disaster.
