Financial crisis

Financial crises are major disruptions in the financial system caused by a sudden drop in property asset valuations (eg corporate investments - see the stock market crash ). , And the insolvency of many companies in the financial sector and other sectors are characterized and affect the economic activity in one or more countries The German Language Society chose the word 2008 word of the year.

  • 4.1 Ancient crises
  • 4.2 crises in the 17th and 18th centuries
  • 4.3 crises in the 19th century
  • 4.4 crises in the early 20th century
  • 4.5 Global crises to Bretton Woods
  • 5.1 Notes and references
  • 5.2 Literature
  • 5.3 External links
  • 5.4 See also

Variants

In principle, a distinction is made according to their external appearance between banking crises, currency crises, financial system crises and crises in which a country or individual countries their foreign debt can no longer use ( debt crisis).

Theories of economics

Overinvestment theories

According to the monetary overinvestment theory by Friedrich August von Hayek and Knut Wicksell, there is an increase in the internal rate of return of the company, ie the " natural rate of interest ", such as technical progress over the existing money rate of interest. On the capital market, the demand for loans to finance new investments. First, the additional liquidity fuels the boom, in the course of which investment projects with lower (expected) returns will be financed.

According to Hayek, the greater demand does not lead to an increase in interest rates, because the banks understand the general economic recovery as an incentive to expand the credit supply with demand. Only after a time delay, the interbank interest rate adjusts to the natural interest rate. Then, property investments, may prove to be oversized. Investment projects that were profitable nor to the previous deposit interest rate will be canceled. The structural improvements attracts businesses, consumers and financial institutions in the vortex of the crisis. According to Wicksell, the central bank would raise rates in time to prevent the over-investment crisis. Even Hayek recommends a timely increase in the benchmark interest rate by the central bank, without, however, by the financial crises can be avoided entirely. "As far as crisis management, so this succeeds, very roughly speaking, only by reducing excess capacity, so their liquidation. The recommended course of action is simple: nothing. "

The monetary overinvestment theory was the dominant idea in the period around 1929. U.S. President Herbert Hoover followed this theory in the Great Depression of the 1930s largely ( " Hoover Economics" ). Irving Fisher compared these to a doctor who would " leave the healing of nature " with pneumonia. After the bursting of the dotcom bubble in the meantime forgotten monetary overinvestment theory experienced a renaissance.

Monetarism

One theory for the explanation of macroeconomic financial crises goes back to Milton Friedman and Anna J. Schwartz. This explains the Great Depression in the United States with a failed policy of the central bank. The reduction of the money supply in the U.S. by 30% between the years 1929 and 1933 they regard as crucial for the course of the Great Depression in the 1930s.

Recent Keynesian and post-Keynesian theories of financial crisis

The assessment of some experts, such as the majority opinion of the Financial Crisis Inquiry Commission, led to the financial crisis from 2007 back in part to the relatively lax financial regulation of the 1980s and 1990s. Even previous proponents of this policy, such as Alan Greenspan, moved after the crisis of the market efficiency hypothesis from. As a result, there has been a renewed interest in Keynesian or post-Keynesian models of explanation.

Hyman Minsky

A Kindleberger on the Post-Keynesians Hyman P. Minsky and Charles P. declining approach explains financial crises as a result of excessive speculation in a booming economy. In the theory of Minsky pursue the investors after a crisis initially a secured financing ( "hedging "). The revenues that follow the investments are sufficient to repay the loans with interest. If it appears that the economic growth to be stable, a " speculative finance " appears eingehbar. The revenue now range from only to service the interest on the loans. The loans themselves are being replaced by new borrowing. Also proves this to be stable, investors finally go to the " Ponzi finance " over, named after Charles Ponzi. Even to be able to finance the interest burden, additional loans are taken now. However, the investors continue to expect that at the very end the income from the investment sufficient to meet all accrued obligations. Overall, however, the economy has become increasingly unstable and in a crisis leads to bankruptcies and to a balance sheet adjustment for the investors. After the crisis begins with the now first again secured financing ( hedging), a new cycle.

Minsky argued that the funding processes of a capitalist economy develop endogenous destabilizing forces. He held the financial institutions of capitalism for " ruinous by itself ." Therefore, he advised them to accept that the area is limited more efficient and desirable free markets.

Marxist explanation

Behavioural Economics

George A. Akerlof and Robert J. Shiller want to continue in their diagnosis of the causes of financial crises back to the prominent John Maynard Keynes idea of "Animal Spirits". This had been in favor of a synthesis neglected Keynesianism with the neoclassical mainstream. Stronger than of rational expectations, the development of the economy was dependent on trust, justice perceptions, phased corruption of ethical standards, money illusion and collective narratives or " stories " that can provide market participants with orientation.

See also: herd behavior.

Measures

Among other things, it is recommended as a measure against financial crises or their damping Macroprudential supervision. that is, supervisors should not only act mikroprudentiell, but keep macroprudential also the total system context in mind.

History

Ancient crises

  • Inflation in the seventh century BC by King Midas.

Midas realized that he could increase to metals for coinage, the money supply by reducing the metal content per coin, given the limited supply. The result was a separation of monetary and credit policy and the globalization of the means of payment. Savers who invested their assets in Midas " Easy Money ", they lose by this monetary overhang and the now overdue currency cut a their purchasing power. Emblematic is the financing technique Midas ' symbolized by the phrase that everything Midas touched has turned into gold, even water. After the narrative of Herodotus Midas died because he choked on the gold turned water.

  • The Roman financial crisis in Asia in the 1st century BC to the Third Mithridatic War leads.

The lawyer and senator Marcus Tullius Cicero described the crisis 66 BC:

" When they had a lot of people lost huge fortunes in Asia, the lending business in Rome collapsed because of the diminished ability to pay. Indeed, it is impossible that many people lose possessions, without cracking or other with him to the same misfortune. Preserves the state of this danger! Indeed, it is - believe me this because you see it yourself - this credit and these financial market, which in Rome on the forum has its center, closely interwoven with the monetary system in Asia. Those things there in Asia can not collapse without the local financial sector is covered by the same shock and also breaks down. "

Crises in the 17th and 18th centuries

  • On February 7, 1637 since about 1634 lasting tulip bulb speculation bursts in Holland. Tulip bulbs were at auctions and on the stock exchange an object of speculation. After 1630 and the trading of warrants blossomed tulip bulb shares. The prices exploded, rising from 1634 to 1637 to more than fifty -fold on. In Amsterdam, a full house for three tulip bulbs were sold. Many bulbs cost several thousand florins, the highest price for the most valuable tulip Semper Augustus, beginning in 1637 amounted to 10,000 guilders for one bulb at a time, as a carpenter earned about 250 florins a year. Speculation had progressed to the speculative bubble.
  • South Sea Bubble
  • Mississippi speculation

Crises in the 19th century

  • Danish state bankruptcy of 1813
  • Economic crisis of 1837 in the United States
  • Economic crisis of 1857 ( the first global economic crisis )
  • Founder crisis of 1873

Crises in the early 20th century

  • Panic of 1907 in the United States
  • The world economic crisis of 1929 was a world of observable severe decline in overall economic performance. Many companies went bankrupt, there was massive unemployment, social deprivation and deflation. The social misery contributed to political crises. The simultaneity of the crisis phenomena was supported by the increased integration of the individual economies and financial flows ( capital mobility).

Global crises to Bretton Woods

Cross-border financial crises after the end of the Bretton Woods system were, inter alia, the

  • U.S. savings and loan crisis in the 1980s
  • Latin American crisis in the 1970s and 1980s
  • Japanese banking crisis in the 1990s
  • A substantially limited to Mexico crisis was the Tequila crisis of 1994 and 1995.
  • Asian crisis of 1997 and 1998
  • Russian crisis of 1998 and 1999
  • Brazilian crisis in 1999
  • Argentine crisis by 2000
  • Dotcom crisis was triggered by a bubble burst in March 2000.
  • Financial crisis from 2007 ( subprime crisis ) and Iceland Financial Crisis 2008-2011
  • Euro crisis 2010-2012, beginning with the Greek crisis

Appendix

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