Causes of the financial crisis
THE FINANCIAL CRISIS
Preparing the grounds: The role of global macro policies and the poor US regulatory framework Introduction
The financial crisis from 2007-2009 is beeing caused at two levels: global macro policies affecting liquidity and a poor regulatory framework
1
The policies affecting liquidity created a situation like a dam overfilled with flooding water
2
The regulatory system have been the faults in the dam, directing the liquidity into the real estate market
Source: „The Current Financial Crisis: Causes and Policy Issues“ by Adrian Blundell-Wignall, Paul Atkinson and Se Hoon Lee
Introduction
Global macro policies affecting liquidity played a major role in the built up to the finacial and economic crisis of 2007-2010
1
2
Global macro policies affecting liquidity
• Global imbalances
• Loose monetary policy by the Fed
Source: „The Current Financial Crisis: Causes and Policy Issues“ by Adrian Blundell-Wignall, Paul Atkinson and Se Hoon Lee
Introduction
1
2
Global macro policies affecting liquidity
• Global imbalances
• Loose monetary policy by the Fed
Source: „The Current Financial Crisis: Causes and Policy Issues“ by Adrian Blundell-Wignall, Paul Atkinson and Se Hoon Lee
Global imbalances
Newly industrialized Asian countries and the oil-exporting Middle East went to surplusses in the 1990‘s, corrospondig with deficits in the industrialized world
1
19891997
• US current account deficit ≤2%
1995
• Developing Asia and Western Countries have comparable deficits 1997
• Asian Crisis as turningpoint. Developing Asia and the newly industrialized Asian group went to surplusses afterwards
2000
• Increasing commodity prices due to worldwide economic growth and the dot-com boom
• Current account surplusses in the oil-exporting Middle East
US deficit increased from 2,0% in 1997 to 4,3% in 2000
Source: „Global Imbalances and the Financial Crisis:
Preparing the grounds: The role of global macro policies and the poor US regulatory framework Introduction
The financial crisis from 2007-2009 is beeing caused at two levels: global macro policies affecting liquidity and a poor regulatory framework
1
The policies affecting liquidity created a situation like a dam overfilled with flooding water
2
The regulatory system have been the faults in the dam, directing the liquidity into the real estate market
Source: „The Current Financial Crisis: Causes and Policy Issues“ by Adrian Blundell-Wignall, Paul Atkinson and Se Hoon Lee
Introduction
Global macro policies affecting liquidity played a major role in the built up to the finacial and economic crisis of 2007-2010
1
2
Global macro policies affecting liquidity
• Global imbalances
• Loose monetary policy by the Fed
Source: „The Current Financial Crisis: Causes and Policy Issues“ by Adrian Blundell-Wignall, Paul Atkinson and Se Hoon Lee
Introduction
1
2
Global macro policies affecting liquidity
• Global imbalances
• Loose monetary policy by the Fed
Source: „The Current Financial Crisis: Causes and Policy Issues“ by Adrian Blundell-Wignall, Paul Atkinson and Se Hoon Lee
Global imbalances
Newly industrialized Asian countries and the oil-exporting Middle East went to surplusses in the 1990‘s, corrospondig with deficits in the industrialized world
1
19891997
• US current account deficit ≤2%
1995
• Developing Asia and Western Countries have comparable deficits 1997
• Asian Crisis as turningpoint. Developing Asia and the newly industrialized Asian group went to surplusses afterwards
2000
• Increasing commodity prices due to worldwide economic growth and the dot-com boom
• Current account surplusses in the oil-exporting Middle East
US deficit increased from 2,0% in 1997 to 4,3% in 2000
Source: „Global Imbalances and the Financial Crisis: