Economist warns of danger of over confidence in economic system

An investor looks at rising stock prices in Wuhan, China. Policy makers often overlook risks to the economy during prosperous years, says Reinhart. (photo: Imaginechina/Corbis)

Economic crisis are often the result of over confidence in the economic and financial system, according to economist Carmen Reinhardt of the Peterson Institute for International Economics.

She's the co-author of an essay titled causes of financial crisis past and present, the role of the 'this time it's different syndrome'.

Reinhardt explains that policy makers tend to overlook warning signs when times are good.

This confidence along with the belief that the economic system has been tamed, can lead to disastrous results for the economy of a nation.

The International Monetary Fund's (IMF) Lika Gueye spoke to Carmen Reinhardt who says that the 'this time it's different syndrome' is not new.

Duration: 4'41"

 

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