This is the Cato Daily Podcast for Friday, March 22nd, 2019.

I'm Keela Brown.

Ten years after a massive financial crisis inflicting substantial pain

throughout the economy, the lessons are still

somewhat hard to come by. Economist Vincent Reinhart spoke with me at the

Cato Institute's monetary conference in November, one of his lessons a

decade later,

wished for better politicians.

What differentiated the recession that took root in 07 and 8 from others.

The financial system.

My wife Carmen and I have done a lot of work about what makes severe financial crisis different

than other plain vanilla recessions? And the answer really is that a financial crisis

represents an enormous destruction of wealth. They've been paper wealth

but people thought they had wealth, and then they're going to live with regret.

The government has to do three things.

They have to admit they lost wealth.

They have to allocate the wealth loss across all

their citizens, and then where possible they can use other policies to

offset the adverse effects on the rest of the economy. Whatever you say about the stress tests in the US, at least we started admitting we lost wealth.

In Japan, they never did.

In Europe, they still haven't completely and hence there's a long

shadow of their financial crises even relative to what happened in the US.

...