Financial Crisis is About to Come Again?

Financial crisis, also known as the financial turmoil, is a country or several countries and regions all or most financial indicators, such as short-term interest rates, monetary assets, securities, real estate, land (the price), number of business bankruptcy and collapse of financial institutions number of sharp, short and super-cycle deterioration. Financial crisis can be divided into a currency crisis, debt crisis, banking crisis and other types. In recent years, some form of financial crisis showed mixed trends. Characteristics of the financial crisis is that people will be more pessimistic about the future based on economic expectations, currencies throughout the region there was a substantial devaluation of the total economy and the economies of scale there was a substantial reduction, economic growth hit, often accompanied by large number of enterprises collapse phenomenon, higher unemployment, that the general economic depression, sometimes accompanied by a level of social unrest or political instability.
Between the financial crisis, there are substantial differences. The current crisis marks the end of the era of credit expansion, this era is based on the dollar as global reserve currency based on. Other periodic crises are larger boom – bust (boom led to overproduction, the backlog of goods, slow-moving) part of the process. The current financial crisis is a super-boom cycle peak, round cycle has lasted 60 years. Boom – bust cycles usually appear around the circle of credit conditions, and will always involve a bias or misconception. This is usually failed to recognize the value of collateral between the willingness to lend and there is a reflexive (reflexive), the relationship cycle. If access to credit, they brought a demand, and this demand has pushed up real estate values; turn, this has increased the amount of available credit. When people purchase real estate, and look forward to from mortgage refinancing to profit, then the resulting foam. In recent years, the U.S. housing boom is a testament to this. The 60-year super-boom continued, it is a more complex example. Whenever trouble when credit expansion, financial authorities have adopted interventions (the market) into the liquid, and find other ways to stimulate economic growth. That created an asymmetric incentive system, also known as moral hazard, which promote more robust credit expansion. This system is so successful that people began to believe that former U.S. President Ronald? Reagan (Ronald Reagan) “market magic” – but our country is called “market fundamentalism” (market fundamentalism). Fundamentalists believe that markets will tend to balance, and allow market participants to pursue their own interests, will be most conducive to common interests. This is obviously a misunderstanding, because the financial markets from collapse is not the market itself, but the intervention. Nevertheless, market fundamentalism became the 1980s accounted for dominance way of thinking, was the beginning of the globalization of financial markets, the U.S. began a current account deficit. Globalization, the United States can learn from the rest of the world’s savings, and consumer goods higher than the output itself. In 2006, the U.S. current account deficit reached its gross domestic product (GDP) of 6.7%. With the introduction of increasingly complex products and more generous terms, the financial markets encouraged consumers to borrow. When the global financial system at risk on the occasion, the financial authorities intervened, has played a role in fueling. Since 1980, the continuous relaxation of regulation, even to the point in name only.
Financial crisis is inherent in the capitalist economic crisis, the contents of 1929 -1933 years of world economic panic, but is a serious financial crisis as a guide. 1994 Mexican financial crisis and the 1997 East Asian financial crisis first occurred in the capitalist world. Can be seen, the financial crisis has its root system is the crisis of capitalism. The possibility exists that the financial crisis inherent in a market economy currency credit mechanism of spontaneous, once financial control, money and capital borrowing in the intensification of conflicts, the financial crisis has shown. The financial activity is characterized by a highly developed modern market economy itself is a high-risk economy, Embedding the financial crisis. Economic globalization and economic integration of the contemporary world economy is another major feature. Economic globalization is the transnational market economy, the highest form of development. Goods between the countries after World War II, further development of relations, countries more economically interdependent, goods, services, capital, technology, frequent international mobility, economic globalization and grew more distinct. The globalization of financial activities in the contemporary world, the new configuration of resources and economically backward countries and regions leap-forward development of the important reasons, but the international credit, investment in big-bang development, its inherent contradictions and deepening financial crisis is bound to that system is not perfect The weakest link in the outbreak. In summary, the modern market economy, there is not only derived from surplus commodity production, the crisis of insufficient demand, and there are financial and credit behavior out of control, excessive use of new financial instruments and capital markets triggered by speculation over the financial crisis. In the capitalist world, the market operation mechanism of the crisis has been the catalyst and the basic system to make it intensified. Financial crisis is not just difficult to avoid the capitalist countries, may also appear in the socialist market economic system. Financial system is not perfect, is out of control financial activities of the endogenous elements of the financial crisis. Because of this, the institutional transformation in our country, people should attach great importance to government regulation and do a good job of building a market economy system, in particular, take great efforts to improve the financial system, greatly enhancing the endogenous and exogenous financial crisis prevention capabilities. Summary: Southeast Asian financial crisis, it is the reason for the crisis had extensive and in-depth discussion. That the underlying causes of the crisis and external reasons, Liu further noted that White is the deeper reason, that is the modern currency credit mechanism lead to crisis. As long as there is a modern market economy, market economy, the credit mechanism inherent in the currency could lead to financial crisis. But, it is only in those systems is not perfect, the most vulnerable countries. This is the socialist market economy is no exception. Nonetheless, we can improve the financial system to prevent financial crisis, Liu said White gave us a way to prevent the financial crisis.