The world is "sleepwalking" towards "financial armageddon" after failing to learn the lessons of the global financial crisis (GFC), says the former head of the Bank of England.
Mervyn King, who was in charge of the UK's equivalent of our Reserve Bank when the GFC hit in 2008, issued the stark warning at the International Monetary Fund's annual meeting in Washington DC, the Guardian reported.
"Another economic and financial crisis would be devastating to the legitimacy of a democratic market system. By sticking to the new orthodoxy of monetary policy and pretending that we have made the banking system safe, we are sleepwalking towards that crisis."
The crisis in 2008 saw unemployment around the world skyrocket, stock markets plummet and economies go into recession. Governments spent billions bailing out banks and other financial institutions.
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The cause has been traced back to the bursting of the subprime lending bubble in the US, as well as risk-taking from major financial institutions such as Lehman Brothers, predatory lending and deregulation.
It was the biggest shock to the international monetary system since the Great Depression of the early 1930s. The difference is the world implemented real change after that crisis - but it hasn't this time around.
"No one can doubt that we are once more living through a period of political turmoil," King said. "But there has been no comparable questioning of the basic ideas underpinning economic policy. That needs to change."
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In the 1990s and 2000s, New Zealand's annual GDP growth would regularly hit 5 percent, on occasion surpassing 6 percent. But since the GFC, most developed economies have experienced steady but low GDP growth - New Zealand included, having only rarely pipped above 4 percent.
"Following the Great Inflation, the Great Stability and the Great Recession, we have entered the Great Stagnation," King said.
He said low interest rates - most economies' primary way of trying to stimulate growth - isn't working.
"It is the failure to face up to the need for action on many policy fronts that has led to the demand stagnation of the past decade. And without action to deal with the structural weaknesses of the global economy, there is a risk of another financial crisis."
The recovery from the Great Depression, economists say, was accelerated by massive public spending in the US from then-President Franklin D Roosevelt's 'New Deal' programme, and worldwide by the need to mobilise for World War II.