A Little Lesson on Economics

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by Erica Nieves 

From April 7 to April 10, I had the opportunity to attend the Phi Theta Kappa International Convention located in National Harbor, MD. This keynote speaker was Lord John Eatwell, President of Queens’ College Cambridge and economist. His presentation covered of what is an important issue talked about in this Presidential election: the state of the financial industry. 

According to Lord Eatwell, the framework of rules governing the U.S. banking system is not determined by Congress but rather by an international committee in Basel, Switzerland called BCBS. I thought this fact was a little strange, as I never heard about this before. Plus, I had always known that Congress deregulated the banking system by repealing the Glass-Steagall Act. I had thought, if there was a committee like that, they would’ve objected to how the U.S. handled the financial system before the recession. He goes on to say that the financial systems were based on trust and confidence, something I never thought of before. He mentioned a statement I agree with one hundred percent: financial regulation attempts to prevent or limit crises. 

When the recession occurred in 2008, the rest of the world was affected. Due to international trade and international banks doing business with each other, other countries started to be affected. Applying the Domino Theory, each country after the United States fell into economic hardships. When countries are connected in an global economy, the results may mirror one another. For example, during the deregulation of securities, bonds have sold tremendously well in the U.S. in 2000, as well as in the U.K. Then the U.K. and the U.S. both had a housing market crash in 2007-2008. This fact helped connect the dots about the U.S. financial system. Lord Eatwell goes on to say that while the U.S. economy is no longer in a recession, it isn’t doing as great as it was before. 

The main lesson I took from his presentation was that financial regulation in any country is the key to prevent or limit crises when risks in the market are being taken. For anyone that wants to work in Wall Street or anywhere else in the financial industry, keep this in mind as risks in the global market will always be taken.

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