The Doom Cycle

April 19, 2010Jon Brooks Comments Off

Simon Johnson is a professor of entrepeneurship at MIT. In the video below he speaks about The Doom Cycle, described by the web site New Deal 2.0 as “the current boom-bust-bailout structure of the financial sector that leads to economic crises.” Johnson talks about the system of incentives to take greater and greater risks that has developed since the Reagan Revolution.

The “Doom Cycle” is one of the most significant ideas within the discourse on the current economic crisis. What the “Doom Cycle” offers is an explanation and a solution to the current financial crisis and the conditions which helped to create it. The “Doom Cycle” serves as a framework through which we can begin to address the economic condition of America in the twenty-first century. If we are to avoid another financial meltdown, leading thinkers believe that serious reforms are necessary. Without them, another, worse crisis may be inevitable. Through this idea, we gain a paradigmatic view of the financial system, and are able to understand the attitude and atmosphere that fosters a cycle of risk, gain, and collapse.

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