I. a single crisis, more explanations
Since the beginning of the crisis, in 2007, three types of explanations have been advanced to justify both evidentul cycle of boom-bust type through which passed the economy in this decade, as well as the proposed solutions to mitigate the effects and prevention of this phenomenon in the future. The arguments offered are not satisfactory-neither in terms of logical coherence, nor by the degree of reflection of reality. Let's take them one by one.
1. Greed
The easiest explanation is greed. Banks ' greed that have hunted even delinquent payers clients in hopes of gathering a higher income from interest applied to loans. Borrowers greed that have stretched more than they are and they upped the duvet on debt purchases. Greed of investors who buy mortgage loans titrizate (mortgage-backed bonds) without more look at the risk related thereto.
The problem with this argument is that greed does not evolve cyclically.
There is no reason to suspect them as American's capitalists more greedy than Russian ones, Brazilian or French. And there is no reason to suppose that market participants are more greedy than those that concern, analyzes and shows greed as the root cause of the crisis. From the perspective of psychological, so we have no reason to give credence to this argument. In addition, from the perspective of economic greed not argument explaining how concretely avantului development (which also determine details decline phase): don't tell us why some sectors are particularly affected by the boom (the activity of real estate, construction, automotive and financial system). It does not help us explain why speculative fever has started in tromba after 2001 and why it stopped suddenly in 2006-2007.
It is not for the first time in history when increasing prices is made on behalf of the speculantilor greed. Leaving aside the question of growth differentials in prices (which makes us wonder why greed is manifested more in real estate rather than in the tourist, for instance), the worse the following question: If the economy dictates the course of greed, why are the prices sellers grow thanks only by 10% (or 50%) per year? Why not doubles prices every month? The answer is that, in fact, not greed determine the evolution of demand. More specifically, greed is limited by the money they have in the Pocket.
2. Stupidity
The second explanation of the crisis put emphasis on errors committed by investors because they lack the capacity to properly assess the risk of investments. From stupidity and ignorance, investors were too bold to buy overvalued assets (irrational exuberance). Wrapped in sophisticated technical arguments (asymmetric information, herding behavior, multiple equilibriums s.a.), the explanation sounds good, but … so. It is equally unrealistic and lacking consistency. First, formulating a trivial and false accusation deeply. Because it is hard to believe that any economics professor or politician, better understand the functioning of the financial system than it can make those who work directly with it-those investors made their own fortune in batting transactions conducted. • Overlook the problem of incentives: market participants are directly interested (in any case, more than others) to overcome informational difficulties. These market participants (investment banks and other asset management firms) collects annually the most outstanding graduates of departments in the best universities. From intellectually, they are among the best members of the society. We can't put the crisis on account of their ignorance than if we treat the situation simplistically.
Secondly, no matter how relevant the problem of information asymmetry may not lead, not crisis. Simply, lack of information prevent individuals getting into shifts (which, with proper knowledge, it would be cost-effective to perform). The consequence is a small number of transactions (missing markets) did not commit errors. Here we must ask why competition hasn't showed beneficial effects that credited theory and practice. For instance, it is strange that no bank has chosen to consolidate its reputation, putting profits above long-term risk than short-term gains. Would seem as secondary, but investors and institutions (so called originators of credit) who created and then resold "toxic assets" are to blame. Both those who initially granted mortgage loans, strainandu them, and they have bought from first gave proof of stupidity equally.
To go to the crisis must abandonam the conventional explanation. You have to wonder why investors acting in corpore in the same way. And the answer is not "because I'm stupid", but "Just because it's profitable." This answer is only apparently paradoxical.
3. The Chinese and the Arabs
The third version of the story says that a crucial role in triggering unsustainable avantului had ample liquidity in the market, due to the low interest rate. The latter, in turn, has been pushed down because of a huge volume of global savings, both public and private origin (several States in the developing world, including China and countries in the Middle East have accumulated huge foreign exchange reserves gradually, they have generated in the American economy). Here the result of credit and commodity prices and encouraging borrowing.
This explanation is supported by, among others, Alan Greenspan, former Governor of the Central Bank. In short, she sinneth great deal relevant to chapter empirical: is false or, at best, incomplete. I say false because international statistics show that economisirile had not increased during the period to which we refer, on the contrary, in the last decades we have witnessed a decrease in the rate of savings in the world. We can say, therefore, that boom has occurred on a historical trend of decline in savings. At the same time, it is true that official reserves of dollars have grown steadily and that States possessing them were channeled towards investments in the American economy. But (1) accumulating money in the coffers of the central banks is not synonym with increased savings and (2) require herself an explanation: there are more dollars in the world because someone has produced first, not because they have fallen out of the sky. If we go further on this thread logically arrive at fundamental determining factor, namely the expansion of the monetary cycle (inflation) at which availed themselves of American authorities.
II. The real guilty: the State and bankers
The three types of explanations tossed in the public eye are not valid. Among other things, all impotmolesc in point of which must in fact begin the correct explanation: money and the functioning of the financial system.
On top of this system lies the Central Bank in its capacity as manufacturer coinage. The Central Bank may extend the monetary mass, because anytime paper bills cost produces on virtually … zero. Thus, it becomes very easy for the State to adopt the policy of too big to fail, by bankers and other important actors from the financial system are encouraged to indatoreze and unwise investments-a phenomenon known as "moral hazard". If the investment return with profit, the money going into the pockets of bankers and other players on the market. If the investments bring losses, they are outsourced through inflation. Nobody cares about anymore since its attendant economic losses may have passed State (citizens). In fact, the huge difference is turned inside out. It becomes cost effective to speculezi, indatorezi, because the only way you can win. If you sit on the sidelines and behave prudently, you don't do than to waste an opportunity and get lost in relation to others. Plain and simple, this is the logic that runs after the system. No matter how many regulations shall be, the tendency toward crisis is incorporated in the system. It can not be avoided than by reforming its foundations.
There are other specific reasons, context-specific, that have shaped this avant-garde. For example, an important part of the american Government's policy to encourage lending to poor population-the so-called subprime loans-a result of the policy of increasing the number of owners of houses. Legislative measures taken in this regard have distorted the credit allocation in stimulating the expansion of housing construction and increase the share of non-performing loans.
The key to avoiding such situations that may happen in the future lies in the proper understanding of the past. Unfortunately, public debate is dominated by "experts" who derive income from the relationships that we maintain with the State or with the financial system-when forefront does not own the politicians themselves. We cannot expect genuine solutions to come here. The incentives are opposed.
