What would it have been like to be in the decision-maker's seat at a central bank in the midst of the crisis in 2008-09? You'd know that you won't have the luxury of going back and making better decisions five years later. Instead, you have to act on the torrent of information that's coming at you from every quarter, and none of it is good. Major banks are literally collapsing, the interbank market is almost nonexistent, and there is panic in the air. Perhaps you feel that panic in the pit of your stomach. This week we'll perform a little thought experiment to see if we can extrapolate what is likely to happen in when the next crisis kicks in.
Related paper: "The Illusion of the Perpetual Money Machine" - by Peter Cauwels and Didier Sornette
Related presentation (PDF): The illusion of the perpetual money machine: Diagnostic and forecast of future crises
Related previous posts:
TED Talk - Didier Sornette: How we can predict the next financial crisis
Didier Sornette’s Zurich Minds Talk: "Predicting Crisis and Triumph"