Avoiding a deep recession: how governments can plan for financial stability

Interviewer: Today I'm interviewing Dr. Willem Buiter on his article of 12th of December, 2022 titled 'Too Much Gloom and Doom?', with a question mark at the end, published in Project Syndicate which argues that the global economy can avoid a crisis, and most probably will. Listeners are expect to have read the article before listening to this interview. Dr. Buiter has occupied many important positions in academia, commerce and government. I will mention just one. He was a member of the original Bank of England Monetary Policy Committee. A link to his fuller CV accompanies this interview. Dr. Buiter, thank you for taking the time for this interview. May I start by asking what are your definitions of a crisis, a financial disaster, and a deep recession? Dr. Buiter: Crisis, by which I would mean a financial crisis, occurs when funding liquidity of systemically important financial intermediaries dries up and when market liquidity for systemically important financial instruments is impaired. We saw this in March 2020, when the COVID pandemic hit. Fortunately, the major authorities in almost all advanced economies at the time, were ready and willing to intervene. Sometimes on a massive scale, both as lenders of last resort and as market makers of last resort. They prevented the financial crisis