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Islamic Finance and the New Financial System: An Ethical Approach to Preventing Future Financial Crises by Tariq Alrifai

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Chapter 11Evaluating Alternative Solutions

The global financial crisis of 2008 was supposed to be the trigger for governments and regulators to bring about change to the financial system. However, it's been more than six years since the collapse of Lehman Brothers and we have yet to see any real change. In the United States, politics and lobbying got in the way of any efforts for real change. In Europe, a sovereign debt crisis hit in 2010, which nearly brought down the entire European banking system. Reform plans were hastily put on hold so that the system could be propped up with yet more debt backed by European Central Bank (ECB) President Mario “Whatever It Takes” Draghi's promises. In Asia, both China and Japan preferred money-printing and ineffective stimulus plans over the more painful route of reform. As such, the financial system has become more dangerous and the problems even larger to solve.

The lack of real reform and real change to the financial system is the main reason we keep hearing politicians, economists, and central bankers talk about the economy still recovering. The world has not witnessed such a prolonged recovery since the Great Depression. If governments and central bankers were truly in control of the problem, then their money-printing and stimulus programs would have worked by now. The fact that they have not only means that they do not understand the problems, but also that they do not see the next crisis coming. The ECB, which has been unsuccessfully ...

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