recession. i. learning from crises folk wisdom, policymakers and researchers see opportunities in crises. everyone is familiar with the notion that one should never waste a crisis. jean monnet, among the founders of the european union, said that “ europe will be forged in crises, and will be the sum of the solutions adopted for those crises. ” 1 european union and emu decision - makers have made similar statements in each of their crises, including the present one. and when talking about the present situation, they often conclude by saying “ and we will emerge stronger this time too. ” policy economists seek to learn from crises, so that they can do better next time. during the thirty years from 1985 to 2015, i have been involved in a variety of roles in the management of crises, starting from the successful israeli stabilization program of 1985, during which i was part of a small team advising then secretary of state, george shultz, and through the see jean monnet ( 1976 ), memoires, ( paris : fayard ). bis central bankers ’ speeches ongoing management of monetary policy in the united states today, where we are engaged in managing the expected exit from the policies adopted by the fed to deal with the great recession. this morning i want to talk about major lessons learned from the economic crises of the last twenty years, many of them crises in which i was involved. i draw on three papers on lessons of crises that i wrote at different stages during that period. the three papers were written in 1999 ( when i was at the imf ), 2011 ( when i was governor of the bank of israel ), and 2014 ( when i had been nominated but not yet confirmed as vice - chairman of the fed. ) the ten lessons presented in each paper are summarized in table 1. each lesson is numbered, and each bears a letter : f for the 1999 paper ( written when i was at the imf ) ; b for the 2011 paper, when i was at the bank of israel ; and s for siepr 2, where the 2014 paper was presented. each of the lists reflects the concerns of the times and circumstances in which it was written. the 1999 paper was written at a time when the imf was under criticism for its handling of the many crises with which it had been confronted since 1994. it was a time of far less transparency than today. for instance, in may of 1997 when i paid a secret visit to thailand to try to gauge the seriousness of

legislators, and regulators in most countries. in the case of the united states, most of the important changes have been introduced though the dodd - frank act, and they have been supplemented by decisions of the regulators and the supervisors. we are now at a difficult point. regulations have been strengthened and the bankers ’ backlash is both evident and making headway. of course, there should be feedback from the regulated to the regulators, and the regulated have the right to appeal to their legislators. but often when bankers complain about regulations, they give the impression that financial crises are now a thing of the past, and furthermore in many cases, that they played no role in the previous crisis. we should not make the mistake of believing that we have put an end to financial crises. we can strengthen the financial system, and reduce the frequency and the severity of financial crises. but we lack the capacity of imagining, anticipating and preventing all future financial sector problems and crises. that given, we need to build a financial system that is strong enough to withstand the type of financial crisis we continue to battle. we can take some comfort – but not much – from the fact that this crisis was handled much better than the financial crisis of the great depression. but it still imposed massive costs on the people of the united states and those of other countries that were badly hit by the crisis. no - one should underestimate the costs of the financial crisis to the united states and the world economies. we are in the seventh year of dealing with the consequences of that crisis, and the world economy is still growing very slowly. confidence in the financial system and the growth of the economy has been profoundly shaken. there is a lively discussion going on at present as to whether we have entered a period of secular stagnation as larry summers argues, or whether we are seeing a more frequent phenomenon – that recessions accompanied by financial crises are typically deep and long, as carmen reinhart and ken rogoff ’ s research implies. ken rogoff calls this a “ debt supercycle ”. these issues are discussed in s3, s4, s6, b2, b3, and f6. bis central bankers ’ speeches it may take many years until we know the answer to the question of whether we are in a situation of secular stagnation or a debt supercycle. either way, there is now growing evidence that recessions lead not only to a lower level of future output, but also to a persistently lower