Definition:
The “Doom Loop” is a phrase usually used to refer to the present boom-bust-bailout structure of the financial sector that leads to economic crises. Simon Johnson has been a significant proponent of shedding light on this cycle, that he believes begins with risky investments and dangerous financial practices that lead to increased growth and profit, but soon bust — bringing the financial sector to its knees after its inevitable collapse. After the bust comes the bailout, which, although may be necessary at the time, is more harmful in the long run because it doesn’t address the fundamental structural flaws of our financial system. This vicious cycle only continues to grow, and with no salient regulation will continue in perpetuity, bringing with it crisis after crisis.
Further Reading:
Book: Good to Great by Jim Collins.
