In 2008, the world was hit by a financial crisis, the worst since "The Great Depression" of the 1930s. Governments had to step in and bail banks out to prevent the collapse of the global financial system. Many around the world ended up unemployed, losing their homes and investments.
And what is more alarming is that there have been other shake-ups since 2008, including today's impending pandemic-led financial meltdown. Gone are the stress-free and fiscally confident days of 60 to 70 years ago when banking was stable and secure.
So what went wrong? The financial sector's original purpose was to finance a country's economy by supporting individuals and companies with financial difficulties. Today, there is a growing divide between the financial sector and the communities they serve. They no longer manage the savings account of regular people and loan it out to individual borrowers. Now, banks themselves are doing the actual investing, borrowing money from other banks, and risking their customer's cash.
Money is now used to make more money. Bankers and finance experts are on the lookout for the next big thing to invest in - be it a scheme, industry, product, etc. They take big risks and drive prices up. This constant, unchecked speculation is why the banking industry has become more unstable in recent years.
Today, the question "When will the next big financial crisis hit?" is on the back of everyone's minds. It almost seems like we are expecting yet another crash.
The 2008 collapse, and smaller but similar events in the last 20 to 25 years, has made people lose their confidence in financial institutions. We hear of governments stepping up and supporting these banks via trillions of dollars in bail money, yet nothing has changed for ordinary people.
There is now a growing awareness that the current global economic system needs fixing. So what can be done? The banking sector is ever-present in our lives, yet many are unaware of its impact. For things to improve, we need to demystify finance and not be intimidated by it. It is important to educate people to make their own financial decisions and not depend on so-called experts.
Hard-hitting banking reforms also need to be implemented globally. This is what happened after the 1929 stock market crash, which caused the Great Depression. US President Franklin Roosevelt reformed and worked with the financial sector to fix the crisis. What followed was 30 years of financial stability, from 1945 to 1975, free of significant financial upheavals. Countries worldwide followed Roosevelt's example of imposing regulatory measures on banks to ensure that speculative bubbles won't get out of hand.
We have two choices for the future of the world's financial health. The first is to keep things as they are and allow the gap between regular people and financial institutions to continue to widen. The second is to restore and revive the original purpose of finance, which is to help the economy survive.
But for that to take place we need bankers to do their part and be willing to be regulated and most importantly, we also have to get involved. So is the world ready to handle a new financial crisis right now? What do you think?