Journal opinion article - Essay Example

The recent global financial crisis that gripped the whole world beginning 2007 affected almost all sectors of the economy across the spectrum. The prices of properties and taxes significantly increased leaving people with little disposable income. This scenario impacted negatively on the welfare of the people in different parts of the globe. A repeat of a similar scenario will obviously bring sad memories to different people. However, some analysts believe that regulation can help prevent a similar situation from occurring in the future. As such, this journal article seeks to critically analyse the article titled “New Regulations May Lower Chance of Another Crisis, Bernanke Says” by Guthrie Amy. The article is found in the Wall Street Journal of March 23, 2015.
According to the former U.S. Federal Reserve Chairman Ben Bernanke, “Efforts to strengthen regulatory oversight of financial institutions in the U.S. following the 2008 debacle should make future crises less likely to occur, or less severe if they do.” The main argument presented here is that the possibility of future crises cannot be ruled out. As such, mitigation measures like regulation of the financial sectors can help prevent the occurrence of a similar situation. Bernanke suggests that “Steps such as submitting large banks to Fed stress tests to assess risk should lessen the likelihood of another crisis or soften the broader economic impact should one occur” (Amy). Therefore, to a large extent, it is a noble idea to regulate the activities of the financial sector in order to ensure that a similar crisis does not occur in the future.
Theoretically, regulation of the financial sector has its pros and cons. According to Harrison (208), borrowing from the banking system leads directly to an increase in interest rates and the Treasury Bills are likely to increase. This scenario has spiral effects on the performance of the economy. An increase in interest rates implies that the money supply will shrink resulting in less disposable income circulating among the people. Such conditions are likely to lead to the occurrence of financial crises and this is the reason why regulation of the financial sector is seen as a noble idea that can be implemented to reduce the chances of the same situation from happening again. However, regulation of the financial sector has got its own problems. A market economy should function freely and any form of regulation may gag the independence of the sector. Negative results are likely to be experienced and these may be detrimental to the performance of the economy as a whole.
Over and above, it can be observed that financial crisis as the one witnessed in 2007-8 is detrimental to the economy and impacts negatively on the welfare of the people across the whole economy. The occurrence of a similar crisis cannot be ruled out hence the need for contingency measures to be put in place to avoid the repeat of the same scenario. As discussed above, it can be see that regulation of the financial services sector can be a very good strategy that can be implemented in order prevent the occurrence of similar financial crises in the future.

Works cited
Guthrie Amy. “New Regulations May Lower Chance of Another Crisis, Bernanke Says.” Wall
Street Journal. http://blogs.wsj.com/economics/2015/03/20/new-regulations-may-lower-chance-of-another-crisis-bernanke-says/>. March 20, 2015. Web March 23, 2015.
Harrison, Barry. Economics. London: Longman, 1986. Print. Read More