The document analyzes commonalities between the 1994 Mexican and 2007 Greek financial crises through a Minskyan lens. It finds that both crises arose from:
1) Excessive private and public spending and debt accumulation during economic booms
2) Lax financial regulation and risk management that failed to curb speculative behavior
3) Financial volatility and loss of confidence that accelerated the transition from boom to bust
This is a presentation on Worldwide Financial Crisis made by Vinod Thomas, Director-General & Senior Vice President at the Independent Evaluation Group, World Bank. In the presentation, Mr. Thomas describes the reasons for the recent financial crisis, highlights the extent of damages, and discusses policy responses to the crisis.
The Cyprus crisis is one of the most complex in the Eurozone -although in absolute terms it is a minor crisis. An analysis of the ongoing developments from different perspectives leads to the conclusion that we are witnessing a «perfect crisis» at the confluence of sovereign debt and banking crisis together with debt overhang of business and households and a severe decline of competitiveness. As a result CY has amassed a large external debt that can not be repaid, no matter what fraction of the country’s real domestic economic output is appropriated through austerity measures. Hence, fiscal austerity leads to deflationary stagnation and alone does not work. We advocate a policy response that addresses multiple dimensions of the problem with policy options of (1) austerity deleveraging, (2) structural reforms, (3) financial innovations, (4) partial privatizations and (5) debt restructuring. These options are drawn from lessons of what worked well, and what not, in crises of other countries and these lessons are summarized in lieu of conclusions
This is a presentation on Worldwide Financial Crisis made by Vinod Thomas, Director-General & Senior Vice President at the Independent Evaluation Group, World Bank. In the presentation, Mr. Thomas describes the reasons for the recent financial crisis, highlights the extent of damages, and discusses policy responses to the crisis.
The Cyprus crisis is one of the most complex in the Eurozone -although in absolute terms it is a minor crisis. An analysis of the ongoing developments from different perspectives leads to the conclusion that we are witnessing a «perfect crisis» at the confluence of sovereign debt and banking crisis together with debt overhang of business and households and a severe decline of competitiveness. As a result CY has amassed a large external debt that can not be repaid, no matter what fraction of the country’s real domestic economic output is appropriated through austerity measures. Hence, fiscal austerity leads to deflationary stagnation and alone does not work. We advocate a policy response that addresses multiple dimensions of the problem with policy options of (1) austerity deleveraging, (2) structural reforms, (3) financial innovations, (4) partial privatizations and (5) debt restructuring. These options are drawn from lessons of what worked well, and what not, in crises of other countries and these lessons are summarized in lieu of conclusions
SmithStreetSolutions has broken down the US and China stimulus packages into ten spending categories in order to compare and analyze their effects. Our research shows that both packages will help bring global recovery by promoting trade. Additionally, China has seized the opportunity to use its package to advance two key long-term development goals, upgrading manufacturing and opening up its rural and western markets, that are critical milestones in the transition from ‘Made in China’ to ‘Created in China’.
Moez Labidi - Professor of Economics at the University of Monastir in Tunisia
In this presentation, Moez Labidi, Professor of Economics at the University of Monastir in Tunisia, discusses the current challenges of the democratic transition in Tunisia.
GDN-AUB Panel Discussion on "The road to democracy: The Arab region, Latin America and Eastern Europe".
Beirut, Lebanon
May 18th, 2012.
Overview about The financial Crisis in 2008. The presentation with 4 main points: reasons, development (also including responses), and consequences.
We hope that this is an easy source of information for you to understand this crisis.
Major Market Crises of History: Reason and Effect YRS1204
There are many market crises that happened over the last 150 years, three of the major ones are discussed in the presentation which are:
1929 Wall Street Crash
2000 Dot-Com Bubble
2008 Global Financial Crisis
Juego & Schmidt (28may10) The Global Crisis and the Assault on DemocracyBonn Juego
Paper presented at the Conference ‘After the Gold Rush: Economic Crisis and Consequences’, University of Iceland, Reykjavik, 27-28 May 2010.
ABSTRACT. The paper argues that the current global capitalist crisis entails an assault on democracy. Since crisis connotes danger and opportunity, the recent crisis appears to be a danger to democracy but an opportunity to its antithetical ideals. At the international level, multilateral institutions have seized the moment to reaffirm the perpetuation of the discursive and structural hegemony of neoliberalism. In East and Southeast Asia, states and regional organisations have revived arguments for the institutional justification of authoritarian liberalism in the region. And in the US and Europe, attempts at restoring nationalism are gaining ground. The global crisis provides the momentum for—but not the sole cause of—the intensification of these counter-democratisation movements and tendencies.
Chapter 7 The Global Financial CrisisTHE GLOBAL FINANCIAL CRIS.docxbissacr
Chapter 7 The Global Financial Crisis
THE GLOBAL FINANCIAL CRISIS HAD WIDESPREAD EFFECTS. In its early days in September 2008, a trader reacted to the numbers on the floor of the New York Stock Exchange as the Dow plummeted.
Learning Objectives
1. 7.1Evaluate the causes that contributed to creating the financial crisis
2. 7.2Review the impact of the global financial crisis on different world economies, business, employment, and global power shifts
3. 7.3Evaluate the concerns that made different countries respond in different ways to the financial crisis
Financial crises and accompanying economic recessions have occurred throughout history. Periodic crises appear to be part of financial systems of dominant or global powers. The United States was at the epicenter of the financial crisis of 2008–2009. Enjoying a unipolar moment following the collapse of the Soviet Union and the failure of Communism, the United States was confident that economic liberalization and the proliferation of computer and communications technologies would contribute to ever-increasing global economic growth and prosperity. Globalization contributed to the extraordinary accumulation of wealth by a relatively few individuals and created greater inequality. In an effort to reduce inequality in the United States, the government implemented policies that engendered the financial crisis.
As we discussed in Chapter1, is usually the leading force in the growth of globalization. The rise of great powers is inextricably linked to access to investments and their ability to function as leading financial centers, as we saw in Chapter2. Their decline is also closely linked to financial problems. Finance enables entrepreneurs to start various enterprises and to become competitors of established companies. It is also essential to innovation and scientific discoveries. Finance also facilitates risk sharing and provides insurance for risk takers. Countries that have large financial sectors tend to grow faster, their inhabitants are generally richer, and there are more opportunities. Financial globalization contributed to unprecedented growth and prosperity around the world. China and India became significant economic powers, and the industrialized countries grew even richer. Closely integrated into the financial system are banks and investment firms. When the financial system is in crisis, banks reduce lending, companies often face bankruptcy, and unemployment rises. Ultimately, as we saw in the financial crisis of 2008–2009, many banks fail.
The financial crisis triggered a global economic recession that resulted in more than $4.1 trillion in losses, saw unemployment rates that climbed to more than 10 percent in the United States and higher elsewhere, and increased poverty. Stock markets around the world crashed. American investors lost roughly 40 percent of the value of their savings. Housing prices plummeted from their record highs in 2006. Consumers reduced their spending, manufactu.
SmithStreetSolutions has broken down the US and China stimulus packages into ten spending categories in order to compare and analyze their effects. Our research shows that both packages will help bring global recovery by promoting trade. Additionally, China has seized the opportunity to use its package to advance two key long-term development goals, upgrading manufacturing and opening up its rural and western markets, that are critical milestones in the transition from ‘Made in China’ to ‘Created in China’.
Moez Labidi - Professor of Economics at the University of Monastir in Tunisia
In this presentation, Moez Labidi, Professor of Economics at the University of Monastir in Tunisia, discusses the current challenges of the democratic transition in Tunisia.
GDN-AUB Panel Discussion on "The road to democracy: The Arab region, Latin America and Eastern Europe".
Beirut, Lebanon
May 18th, 2012.
Overview about The financial Crisis in 2008. The presentation with 4 main points: reasons, development (also including responses), and consequences.
We hope that this is an easy source of information for you to understand this crisis.
Major Market Crises of History: Reason and Effect YRS1204
There are many market crises that happened over the last 150 years, three of the major ones are discussed in the presentation which are:
1929 Wall Street Crash
2000 Dot-Com Bubble
2008 Global Financial Crisis
Juego & Schmidt (28may10) The Global Crisis and the Assault on DemocracyBonn Juego
Paper presented at the Conference ‘After the Gold Rush: Economic Crisis and Consequences’, University of Iceland, Reykjavik, 27-28 May 2010.
ABSTRACT. The paper argues that the current global capitalist crisis entails an assault on democracy. Since crisis connotes danger and opportunity, the recent crisis appears to be a danger to democracy but an opportunity to its antithetical ideals. At the international level, multilateral institutions have seized the moment to reaffirm the perpetuation of the discursive and structural hegemony of neoliberalism. In East and Southeast Asia, states and regional organisations have revived arguments for the institutional justification of authoritarian liberalism in the region. And in the US and Europe, attempts at restoring nationalism are gaining ground. The global crisis provides the momentum for—but not the sole cause of—the intensification of these counter-democratisation movements and tendencies.
Chapter 7 The Global Financial CrisisTHE GLOBAL FINANCIAL CRIS.docxbissacr
Chapter 7 The Global Financial Crisis
THE GLOBAL FINANCIAL CRISIS HAD WIDESPREAD EFFECTS. In its early days in September 2008, a trader reacted to the numbers on the floor of the New York Stock Exchange as the Dow plummeted.
Learning Objectives
1. 7.1Evaluate the causes that contributed to creating the financial crisis
2. 7.2Review the impact of the global financial crisis on different world economies, business, employment, and global power shifts
3. 7.3Evaluate the concerns that made different countries respond in different ways to the financial crisis
Financial crises and accompanying economic recessions have occurred throughout history. Periodic crises appear to be part of financial systems of dominant or global powers. The United States was at the epicenter of the financial crisis of 2008–2009. Enjoying a unipolar moment following the collapse of the Soviet Union and the failure of Communism, the United States was confident that economic liberalization and the proliferation of computer and communications technologies would contribute to ever-increasing global economic growth and prosperity. Globalization contributed to the extraordinary accumulation of wealth by a relatively few individuals and created greater inequality. In an effort to reduce inequality in the United States, the government implemented policies that engendered the financial crisis.
As we discussed in Chapter1, is usually the leading force in the growth of globalization. The rise of great powers is inextricably linked to access to investments and their ability to function as leading financial centers, as we saw in Chapter2. Their decline is also closely linked to financial problems. Finance enables entrepreneurs to start various enterprises and to become competitors of established companies. It is also essential to innovation and scientific discoveries. Finance also facilitates risk sharing and provides insurance for risk takers. Countries that have large financial sectors tend to grow faster, their inhabitants are generally richer, and there are more opportunities. Financial globalization contributed to unprecedented growth and prosperity around the world. China and India became significant economic powers, and the industrialized countries grew even richer. Closely integrated into the financial system are banks and investment firms. When the financial system is in crisis, banks reduce lending, companies often face bankruptcy, and unemployment rises. Ultimately, as we saw in the financial crisis of 2008–2009, many banks fail.
The financial crisis triggered a global economic recession that resulted in more than $4.1 trillion in losses, saw unemployment rates that climbed to more than 10 percent in the United States and higher elsewhere, and increased poverty. Stock markets around the world crashed. American investors lost roughly 40 percent of the value of their savings. Housing prices plummeted from their record highs in 2006. Consumers reduced their spending, manufactu.
Will the US Rebound Cause Another Emerging Markets Crisis?Brien Desilets
Going back to the 1920s we find evidence of emerging market financial crises caused by events in the US. The financial crisis of 2008-2009 was different for emerging markets than previous crises. Current accounts were generally in surplus or balanced. Many emerging market leaders have already complained about the Federal Reserve’s Quantitative Easing program, believing that loose monetary policy in the US is fueling bubbles not only in global commodities but in emerging market equities and real estate.
This is a recording of a revision webinar exploring some of the causes of financial crises in developed and emerging market countries. There are many different types of crises ranging from currency/external debt crises to disturbances in banking systems.
Dr. Alejandro Diaz Bautista, Economic Policy and Stabilization in MexicoEconomist
Economic Policy Stabilization and Mexico’s 1994 Economic Crisis
(Also known as “el error de diciembre”, The December Mistake).
Alejandro Díaz-Bautista, Ph.D.
adiazbau@hotmail.com
Professor of Economics and Researcher
Enterprise Liquidity Risk: Overcoming the challengesCognizant
Given the vastness of today's global financial system and the volume and complexity of data that financial institutions must deal with every day, firms must learn how to proactively manage liquidity risk and avoid the pitfalls that sparked past financial crises. Predictive analytics and advanced risk-monitoring systems are among the tools available to help these institutions overcome the challenges of doing business in an increasingly connected world.
This essay is explaining the causes of the 1980s debt crisis which swept a lot of LDCs countries especially Latin America. the way with which it was dealt and how it changed the international institutions.
Place an order for this assignment or any other paper with us at superbessaywriters.com/order. We guarantee that the paper will be delivered within the specified deadline.
International economic integration is a fundamental aspect of globalization, although it's essential to remember that globalization encompasses more than just economics. While economics is a significant part of globalization, it's not the entire picture. Economic globalization plays a crucial role in facilitating global culture and politics. Trade allows for the exchange of cultural products, like movies and music, and is intertwined with political diplomacy, often serving as a basis for international relations.
Given the importance of economic globalization, it's vital to consider how to make the system more equitable. While some aspects of global free trade can be adjusted, it cannot be completely eliminated. International policymakers should focus on making trade deals fairer and ensuring that governments find ways to mitigate the negative impacts of economic globalization while making sure its benefits are accessible to all.
The Great Depression - Presentation (Macroeconomics Perspective)Arjun Parekh
This brief presentation on 'The Great Depression' has been made from the point of view of understanding Macroeconomic factors that played an important role.
USDA Loans in California: A Comprehensive Overview.pptxmarketing367770
USDA Loans in California: A Comprehensive Overview
If you're dreaming of owning a home in California's rural or suburban areas, a USDA loan might be the perfect solution. The U.S. Department of Agriculture (USDA) offers these loans to help low-to-moderate-income individuals and families achieve homeownership.
Key Features of USDA Loans:
Zero Down Payment: USDA loans require no down payment, making homeownership more accessible.
Competitive Interest Rates: These loans often come with lower interest rates compared to conventional loans.
Flexible Credit Requirements: USDA loans have more lenient credit score requirements, helping those with less-than-perfect credit.
Guaranteed Loan Program: The USDA guarantees a portion of the loan, reducing risk for lenders and expanding borrowing options.
Eligibility Criteria:
Location: The property must be located in a USDA-designated rural or suburban area. Many areas in California qualify.
Income Limits: Applicants must meet income guidelines, which vary by region and household size.
Primary Residence: The home must be used as the borrower's primary residence.
Application Process:
Find a USDA-Approved Lender: Not all lenders offer USDA loans, so it's essential to choose one approved by the USDA.
Pre-Qualification: Determine your eligibility and the amount you can borrow.
Property Search: Look for properties in eligible rural or suburban areas.
Loan Application: Submit your application, including financial and personal information.
Processing and Approval: The lender and USDA will review your application. If approved, you can proceed to closing.
USDA loans are an excellent option for those looking to buy a home in California's rural and suburban areas. With no down payment and flexible requirements, these loans make homeownership more attainable for many families. Explore your eligibility today and take the first step toward owning your dream home.
how to sell pi coins in South Korea profitably.DOT TECH
Yes. You can sell your pi network coins in South Korea or any other country, by finding a verified pi merchant
What is a verified pi merchant?
Since pi network is not launched yet on any exchange, the only way you can sell pi coins is by selling to a verified pi merchant, and this is because pi network is not launched yet on any exchange and no pre-sale or ico offerings Is done on pi.
Since there is no pre-sale, the only way exchanges can get pi is by buying from miners. So a pi merchant facilitates these transactions by acting as a bridge for both transactions.
How can i find a pi vendor/merchant?
Well for those who haven't traded with a pi merchant or who don't already have one. I will leave the telegram id of my personal pi merchant who i trade pi with.
Tele gram: @Pi_vendor_247
#pi #sell #nigeria #pinetwork #picoins #sellpi #Nigerian #tradepi #pinetworkcoins #sellmypi
Yes of course, you can easily start mining pi network coin today and sell to legit pi vendors in the United States.
Here the telegram contact of my personal vendor.
@Pi_vendor_247
#pi network #pi coins #legit #passive income
#US
The European Unemployment Puzzle: implications from population agingGRAPE
We study the link between the evolving age structure of the working population and unemployment. We build a large new Keynesian OLG model with a realistic age structure, labor market frictions, sticky prices, and aggregate shocks. Once calibrated to the European economy, we quantify the extent to which demographic changes over the last three decades have contributed to the decline of the unemployment rate. Our findings yield important implications for the future evolution of unemployment given the anticipated further aging of the working population in Europe. We also quantify the implications for optimal monetary policy: lowering inflation volatility becomes less costly in terms of GDP and unemployment volatility, which hints that optimal monetary policy may be more hawkish in an aging society. Finally, our results also propose a partial reversal of the European-US unemployment puzzle due to the fact that the share of young workers is expected to remain robust in the US.
how can I sell pi coins after successfully completing KYCDOT TECH
Pi coins is not launched yet in any exchange 💱 this means it's not swappable, the current pi displaying on coin market cap is the iou version of pi. And you can learn all about that on my previous post.
RIGHT NOW THE ONLY WAY you can sell pi coins is through verified pi merchants. A pi merchant is someone who buys pi coins and resell them to exchanges and crypto whales. Looking forward to hold massive quantities of pi coins before the mainnet launch.
This is because pi network is not doing any pre-sale or ico offerings, the only way to get my coins is from buying from miners. So a merchant facilitates the transactions between the miners and these exchanges holding pi.
I and my friends has sold more than 6000 pi coins successfully with this method. I will be happy to share the contact of my personal pi merchant. The one i trade with, if you have your own merchant you can trade with them. For those who are new.
Message: @Pi_vendor_247 on telegram.
I wouldn't advise you selling all percentage of the pi coins. Leave at least a before so its a win win during open mainnet. Have a nice day pioneers ♥️
#kyc #mainnet #picoins #pi #sellpi #piwallet
#pinetwork
how to swap pi coins to foreign currency withdrawable.DOT TECH
As of my last update, Pi is still in the testing phase and is not tradable on any exchanges.
However, Pi Network has announced plans to launch its Testnet and Mainnet in the future, which may include listing Pi on exchanges.
The current method for selling pi coins involves exchanging them with a pi vendor who purchases pi coins for investment reasons.
If you want to sell your pi coins, reach out to a pi vendor and sell them to anyone looking to sell pi coins from any country around the globe.
Below is the contact information for my personal pi vendor.
Telegram: @Pi_vendor_247
2. Elemental Economics - Mineral demand.pdfNeal Brewster
After this second you should be able to: Explain the main determinants of demand for any mineral product, and their relative importance; recognise and explain how demand for any product is likely to change with economic activity; recognise and explain the roles of technology and relative prices in influencing demand; be able to explain the differences between the rates of growth of demand for different products.
when will pi network coin be available on crypto exchange.DOT TECH
There is no set date for when Pi coins will enter the market.
However, the developers are working hard to get them released as soon as possible.
Once they are available, users will be able to exchange other cryptocurrencies for Pi coins on designated exchanges.
But for now the only way to sell your pi coins is through verified pi vendor.
Here is the telegram contact of my personal pi vendor
@Pi_vendor_247
Falcon stands out as a top-tier P2P Invoice Discounting platform in India, bridging esteemed blue-chip companies and eager investors. Our goal is to transform the investment landscape in India by establishing a comprehensive destination for borrowers and investors with diverse profiles and needs, all while minimizing risk. What sets Falcon apart is the elimination of intermediaries such as commercial banks and depository institutions, allowing investors to enjoy higher yields.
1. Elemental Economics - Introduction to mining.pdfNeal Brewster
After this first you should: Understand the nature of mining; have an awareness of the industry’s boundaries, corporate structure and size; appreciation the complex motivations and objectives of the industries’ various participants; know how mineral reserves are defined and estimated, and how they evolve over time.
1. Elemental Economics - Introduction to mining.pdf
A Minskyan analysis of commonalities between the financial crises of Mexico 1994 and Greece 2007. New problems versus old ills
1. “A Minskyan analysis of commonalities between the financial
crises of Mexico 1994 and Greece 2007. New problems versus old
ills” Jesús Muñoz
“Philosophy is about unity”
This analysis is for financial crises understanding and prevention. (A)
Minskyan crises arise from investment-debt mismatches in booms.
Transit to busts is accelerated by lax regulation, asset creation and
financial volatility
(B) Expenditure and debt cause them, speculation ‘ignite’ them, and
recession and inequality are their result. Policies aggravate them.
Long-term circuit breakers may avoid their socialization
Hence all crises exhibit a single internal pattern. For proving this, 1
describes ‘modern’ crises, 2 outlines orthodox and heterodox views,
3 explains all crises, 4 suggests globalized policies and 5 concludes
2. “A Minskyan analysis of …” 1. Description
• Crises retard development. They are rooted in ´rapid´
globalization, governance, and productive fragility
• But ‘modern’ crises are primarily due to financial
development, related to private and public indebtedness
• Risks fuel modern crises. They are ubiquitous, generate
globalized contagion and face similar management
• External debt crises recur since 1982, and ‘modern’ crises
since the mid-1990s (Table 1), socializing risks
3. 1. Description
Table 1 Financial crises between those of Mexico and
Greece
Country/region Date Causes Outline
East Asia July 1997 Pegs, private deficit,
banking crisis
Explosion and
‘contagion’
Russia August 1998 Under- performance,
default, speculation
Control and
‘contagion’
Brazil January 1999 Peg, weak
fundamentals, public
deficit, default
Control
Turkey September 2000 Budget deficit Control
Argentina December 2001 Collapsing currency
board
Recession and
‘contagion’
Source: Own elaboration.
4. ‘1. Description
• 1.1 Mexico 1994: A currency crisis
• Latin America enjoyed a boom, starting in 1989.
Confidence was restored after the Brady Plan
• Mexico received portfolio capital since 1988, ignoring
risks. Positive expectations arose from NAFTA in 1994
• Mexican growth, prices and ratings improved between
1990-1993. In 1994 Tesobonos were issued to hide
borrowing
5. ‘1. Description
Table 2 Growth in Mexico and Greece
Year Real
growth
(%)
Year Real
growth
(%)
1994 4.4 2004 4.4
1995 -6.2 2005 2.3
1996 5.2 2006 4.6
1997 6.8 2007 3.0
1998 5.0 2008 -0.1
1999 3.8 2009 -3.2
2000 6.6 2010 -3.5
2001 0.0 2011 -6.9
6. 1. Description
• After political events, the Peso was devalued in December 1994
and mini-devaluations ensued, speculation arose and K left.
‘Contagion’ arose
• The Peso was pegged to the $ in 1987, but the US economy
diverged. Over-lending sustained growth after banks were
privatized in 1991. Investment and GDP ¯. Debts soared
• Rescue came in March 1995. An insurance deposit was created,
banks were recapitalized and $ credits were restructured
• Since 1995 the Peso floats and growth resumed. After 1997
inflation and interest rates ¯, while fiscal policy was reformed
7. 1. Description
• 1.2 Similar subsequent crises
• Elsewhere pegs promoted un-hedged inflows and
indebtedness circa 1995. Deregulation was going on but banks
were undercapitalized
• The target was SSEE AAssiiaa with relatively developed finance and
productivity. But problems in fundamentals and weak policies
eventually brought about crises (Tables 2 and 3)
• There were massive K inflows into SE Asia before 1997 with
high growth since the 1960s and peg-created appreciation in
the 1980s
8. 1. Description
• Booms inflated liabilities and current deficits. Low-quality
private investment and debt became excessive. The bubble
arose after poor supervision and corporate governance
• Soros-led speculation in forex markets soared. The Bath was
left to float, soon MMaallaayyssiiaa and IInnddoonneessiiaa devalued. SSoouutthh
KKoorreeaa was eventually affected due in part to perceptions
• Outflows proliferated, and debt was eventually repaid like
in Mexico (but it was higher). Economies were full of public
intervention (the chaebols)
9. 1. Description
• Crises were aggravated by indecision and moral hazard.
Economies ¯. Banks failed. The IMF aid was subjected to
fiscal, monetary, financial and structural reforms.
Supervision and foreign participation improved
Table 3 Real growth in SE Asia
10. 1. Description
• In RRuussssiiaa the band regime became unsustainable. Public debt
increased, and outflows ensued. ‘Contagion’ prevailed during late
1998
• The BBrraazziilliiaann currency was pegged to the $. Speculation soared. In
view of the Russian default it was allowed to float with a failing
financial system in 1999
• AArrggeennttiinnaa chose an eventually unsustainable currency board in
1991. There was speculation. Fiscal expenditure caused
devaluations and slumps in 1997 and more dramatically in 2001
• ‘External’ shocks were ‘impossible’ to be forecasted
11. 1. Description
• 1.3 Greece-Europe-US 2007: A domestic-debt crisis?
• Greece under-reported its budget deficit in 2000 (Figure 1)
• Financial products were developed but liabilities were hidden.
The Euro-inspired boom fueled government spending and public
debt soared
• After 2007 doubts arose about Greece payments of its debt and
it became a speculative target
• Euro-zone countries ‘eventually’ agreed rescue. A 2nd larger
bailout was agreed in 2012, subject to austerity
13. 1. Description
• Recent activity in the Eurozone has been soft
• Policies in Greece attempted to avoid stagnation and new
bubbles via financial reforms, like in Latin America
• The fiscal gap must have been closed as interest rates ¯ and
debt got back to the country
As of 2013 Greece advanced in structural reforms and tax
collection, but continued to adjust via recessions (Table 5)
14. 1. Description
Debt must be ¯ to 124% of GDP by 2020. Greece modified its
fiscal program more than SSppaaiinn (IMF 2012). Time was needed
for reforms and debt relief
• Mexican and Greek crises were caused by excessive –public-expenditure,
over-lending, underpriced risk and peg (to $ or
the €). Mexico in 1994 and Greece –Spain and IIttaallyy- in 2007
possessed unstable finance
• Those crises were due to reduced confidence and investment.
In developed countries mortgages as the speculative vehicle
ignited -but not caused- the 2007 subprime crisis
15. 1. Description
• 2007
• The consequence in the UUSS was a gigantic a-la-Mexico bailout,
related to the Fed´s response and to the public safety net (cf. Wray,
2009) and losses were socialized. The UUKK faced a similar situation
• Debt rules were set in motion. The Eurozone was the concern in
terms of increasing globalized risks, just like L.A. in the 1980s
• A Keynesian policy was necessary to counterbalance austerity, since
non sovereign forex nations do not need wage or employment cuts
• Bailouts were granted to IIrreellaanndd and PPoorrttuuggaall but further rescues
were required from the IMF, the European Central Bank and the EU
16. 1. Description
• Stimulus and stabilizers were needed with the inflexible €.
Stable interest rates, central banks intervention and fiscal
management generate stability and profits
• When entities paid their debts with borrowed $ they called
for public bailout
• Recessions spread out across the region in 2009 and some
countries approached default in 2010, resembling LL..AA.. in
the early 1980s. Dynamics were modified
17. 2. Theories
• There are conflicting narratives about domestic crises. Nevertheless
their ccoommmmoonn ppaatttteerrnnss must be searched after 2nd thoughts on their
causes, mechanics, prevention and policies arise
• As observed, crises (not only 1990s currency crises) are varieties of a
single phenomenon. This must be confirmed by Orthodox, Minskyan
and complex systems theories, focusing on qualitative and historical
issues
• 2.1 Orthodox (exogenous) theory
• For orthodoxy over-lending (McKinnon, 1996) coupled with pegs is a
main cause, although $ and debts have no place in the Neo-classical
tradition EMH and laissez faire do
18. 2. Theories of financial crises
• Main ‘external’ causes are excessive lending-spending,
pegs, and failing industries and banks (Dornbusch, 1999).
Moral hazard generates financial runs
• An inefficient financial system does not properly allocate
real investment. More transparency is needed. Part of
deregulation is still securitization
• Financial disruptions bring about recessions, altering
distribution (Baldacci, 2002). They also increase short-run
unemployment affecting expectations
19. 2. Theories
• In 1st-generation ex-post models the currency is ‘externally’
devalued after domestic problems (Krugman, 1979). In 2nd-generation
models devaluing is a policy choice (Obstfeld,
1994)
• In 3rd-generation models banking and currency crises occur
simultaneously (Kaminsky & Reinhart, 1998). In 4th-generation
models (Krugman, 1999) crises damage balance sheets
• Economies return to equilibrium. Vulnerability is an exception.
Crises are exogenously caused. The solution is an in global
assets cured by laissez faire (Tornell, 2004).
20. 2. Theories, jesusmunoz_ban@yahoo.com
• 2.2 Heterodox (Minskyan or endogenous) Theory
• There are heterogeneous risk takers (Wray, 2007) and
systems implode after booms
• Minsky’s operationalized Keynes’s uncertainty.
Investment is halted and debt deflation and recessions
arise. Minsky’s FFH (1982) on the debt side in I-D is
relevant
• Heterodoxy mentions deficiencies in deregulation and
excessive financialization ($-manager capitalism)
21. 2. Theories
• Indebtedness progresses through the well known stages and
busts arise. Big Government and the Central Bank soften impact
(Minsky, 1982). A budget deficit is beneficial and recessions
emerge whenever $ is retired from the income flow
• Triggering factors are de-supervision and bullish agents (cf.
Wray, 2009), which arose in the 1970s revealing commonalities
among nations. This is applicable to Mexico 1994 and Greece
2007
•
• 2.3 Complex systems theory
• Supposedly crises come from ‘exogenous’ events and policies.
But systems are internally comprehensive as in Keynes the
‘organicist’
22. 2. Theories
Complexity explains phenomena. The whole differs from the
sum
• Complex systems are comprised by heterogeneous causes,
interrelations, mobiles (triggering factors in orthodoxy), effects
and solutions
• Interrelations are pluralistic, but depart from indebtedness-investment.
Mobile is speculation, say on exchange rates
• Orthodoxy is based on atomism. Homogeneous agents are
linked by simple relationships with ´external´ deviations from
equilibrium
23. 3. Theory application and explanation
• If pieces are properly integrated, crises may be
prevented. For ex. confusion among causes, triggering
factors and symptoms or on the role of speculators are
avoided
• Thus BP (1979), external debt (1982) and currency crises
(in the 1990s) are varieties of financial crises (in the
2000s)
• Similarities between Mexico and Greece are found in
genesis: Indebtedness. ¹ are related to practicalities, for
ex. rescue efficacy, like in the EEUU
24. 3. Theory application and explanation
• ¹ are superficial among emerging countries. In all of them
finance and industries transformations make them vulnerable,
the vehicle being situational (mainly exchange rates)
• All crises are aggravated by misleading policies ( interest
rates in E. Asia). Inadequate surveillance of credit and market
risks happened even in the UK in 2007
• Crises always reduce investment and activity, and debt makes
finance fragile (for Minsky). Sectors are unequally affected
(Tornell, 2004)
25. 3. Theory application and explanation
• Stable investment (real and financial) is the pre-condition
for stability
• While for Heterodoxy the Mexican, the Asian and the
Greek crises were caused by internal -non-random-motives,
events were comprehensive in the complex
system paradigm
• 4. Policy suggestions
• Orthodoxy suggests corrections to spending and assets
issuance. But national tight fiscal policies produce
recessions, and halts in trade via contagion
26. 4. Policy suggestions
• New common-factor orderings and prioritizing may
avoid crises. For ex. speculative situations and
development levels vary, but this is not relevant
• It is necessary to analyze rescue policies. Retiring $
uncertainty. More than risk propensities, uncertainty
factors must be assessed
• Local but co-operative integral, qualitative solutions
must prevail, for ex. in modernization, productivity,
internationalization and reforms to banks and agencies
27. 4. Policy suggestions
• Modernization takes time. In the 3 regions sudden
liberalization generated rapid in(out)flows which revealed
fragilities. ‘Obliged integration’ must be revised
• Regulators must limit assets issuance and central banks
must intervene in cycles acting as circuit breakers
• Orthodox limits in foreign assets creation implemented in
Greece were palliative. Long-term regulation softens crises.
But policies must consider short term problems
28. 4. Policy suggestions
• Use the Lender of Last Resort. Currency sustainability must
be addressed instead of austerity
• Countering fiscal retrenchment and stabilizers for enhancing
spending must be targeted, even if the budget is expanded
• Long-term interest rates must ¯. Financial innovation must
household spending, instead of household indebtedness
• Tight policies are insufficient. Only controlled variables must
be targeted (Hannsgen & Papadimitriou, 2012)
29. 5. Conclusions
• Mexico, Asia & Greece experienced booms after pertaining
to a pegged bloc. Fragile performance and finance
propitiated sudden and huge busts
• Emergent economies implode for being K importers.
Developed countries are vulnerable due to their sizes and
homogeneity. Pattern equalization is confirmed
• This equalization is also related to the identification of
‘common fragilities’ (in heterodoxy and complex systems)
instead of ‘random contagion’ (in orthodoxy)
30. 5. Conclusions
• Disparities among country assets or external shocks do
not cause crises. Disequilibria reign after volatility is
caused by perceptions of fragility
• Crises have predictable common patterns, not being
isolated speculative episodes. Solutions come from
considering interrelated but heterogeneous real-financial
variables, factors and agents
• Debt, spending and investment were hereby reviewed ex-post
to detect a pattern based on 2 cases. Result:
Endogenous crises are exogenously revealed
31. 5. Conclusions, jesusmunoz_ban@yahoo.com
• ‘Modern’ crises unfold from investment-debt in Minsky
(savings in Keynes). These statements equal the Mexican
and the Greek crises
• The subprime crisis is not unique: sophisticated finance is
vulnerable. Thus the evolution of internal-interconnected
quantitative and qualitative variables must be monitored
• There always will be crises as long as economies are
imperfect.
TThhaannkkss!!