Crashed: How a Decade of Financial Crises Changed the World

by Adam Tooze

Before 2008 the driver of crisis was expected to be the balance of financial terror between the United States and China. A huge unwinding of the global disequilibrium centered on China and America and driven by profound domestic imbalances in each of them would, it was feared, rock American power to its foundations. In 2008 the expansion of the EU and NATO in the face of Russian opposition had added another dimension of risk. Georgia and Russia had clashed and Moscow had approached Beijing to mount a joint attack on America’s fragile finances. Beijing had held back. There was no great dollar selloff. The geoeconomic course of the crisis took an unexpected and innovative direction. The Fed’s liquidity swap lines stabilized the dollar-based financial system. In November 2008 the upgrading of the G20 had added a global leadership forum and this had been important in legitimizing the dramatic expansion of IMF resources in 2009. This backstopped the IMF’s urgent engagement in Eastern Europe. A year later, remarkably, the IMF would find itself committing hundreds of billions of dollars to rescuing the eurozone. At the same time, the United States was aggressively pushing a new system of regulation for global banking through the normally slow-moving Basel Committee.