Serial financial crises and the savings glut

WHILE the 2011-2012 euro sovereign debt crisis, the 2008 global financial crisis and their many smaller predecessors have receded in the rearview mirror for many market participants, financial crises remain an important subject for academic researchers, and rightly so. In fact, the last several decades have been characterised by a series of asset bubbles and subsequent localised or global financial crises, and these crises appear to have become ever more severe over time.

Famous German soccer coach Sepp Herberger once said, "After the match is before the match." The same can be said for financial markets: After the crisis is before the crisis.

The complication, of course, is that while soccer players usually know exactly when the next match will kick off, the timing of the next crisis is always uncertain for financial players. All we know is that, eventually, there will be another one.