The European Financial Stability Fund was established in order to provide the liquidity to countries in need, provided that they take drastic steps to recovery. Financial markets should therefore abandon all fear to lend to states and banks in the euro area. This is not what we observe. Is this an effect of a new maneuver speculative or is this a sign that Europe’s problems are not solved so far?

The second hypothesis is by far the most likely, to the point that a new banking crisis is possible. Mmany governing bodies in Europe have worked hard to establish a support fund, endowed with impressive response capabilities. European states are unlikely therefore more liquidity crisis. The problem is that they may rather insolvency.  What “saves” Greece? Officially, the idea is to provide liquidity to the Greek state to finance for three years, until the remedies are working. The underlying assumption is that the Greek situation can be rectified within three years. In that case, why fund managers expect their stratospheric interest rates to buy Greek debt?

The answer most often given is that financial markets are speculating against Greece and Europe in general and that this speculation is self-fulfilling. This response does not make sense, it is quite possible that the CDS accentuate the phenomena, but they do not explain the current difficulties of Greece to find buyers for its debt. Indeed, if the speculation was causing the problem, the price of CDS would be much higher than it is, corresponding to an anticipation of rising interest rates on Greek debt. Since this is not the case, consider another case, more simple, namely that operators do not believe the scenario of recovery in three years and take seriously the possibility of a default state Greek. A look at the available data, it is quite logical. The country’s public deficit for 2009 is estimated by Eurostat between 13.6 percent and 14.1 pervent of GDP, public debt is estimated at between 115 percent and 120 percent of GDP at end 2009.

The first solution is austerity. If the crisis is limited in scope, you can get away with borrowing to buy time and take austerity measures reducing balance. We have seen, this answer is not at the height of the Greek problem. The second solution is inflation, which reduces the real value of debt. But inflation does not assert itself, especially with an independent central bank. Logically, inflation can arise only if the output gap (difference between growth and full employment growth actually occurred) is positive. However, it is now negative and the austerity measures will increase it.

On the monetary side, the ECB already practices zero interest rates and the limited monetization of deficits that has been accompanied by a process equivalent sterilization by attracting additional deposits to her. This solution is currently unthinkable.  The third solution is to restructure the debt. Clearly, this is for the creditors and the Greek state to agree on some Greek debt discount, once accepted the idea that full repayment is impossible. For example, the government would commit to continue to pay interest on the debt and pay 50 € a bond with a face value of 100€.

While being the IMF, Anne Krueger, American economist had also proposed a mechanism similar to U.S. bankruptcy law to manage such situations. In Latin America in the 1990s, the Brady Plan, named after a minister of George Bush senior, has organized such a mechanism discount. The only alternative to a solution of this type would be a sudden collapse. The restructuring, which nobody wants to hear right now, then eventually win through, and this justifies the high interest rates on debt and Greek concerns about the profitability of banks.

We are currently in the eye of the cyclone, it is calm, we will take holidays and everything will resume in September … At least, that is what the media and our great international thinkers say. The G20 has already released all its heavy artillery out of crisis.

To give you an idea, according to Bloomberg, the US government has already spent $ 3.2 trillion ($ 1 trillion) and would be ready to go up to $ 7.7 trillion to revive the infernal machine. The total sum of all major US expenditures in its history (the Vietnam War, Iraq, the Marshall Plan, etc.), reduced to current inflation rates, amounts to 3.5 trillion. If it proved useful! Unfortunately, this little game of giving the banks what they want has absolutely not solved the problems of the real economy: tightening credit, resulting in job losses and bankruptcies.

To get an idea, there are also the last two reports of the GEAB (Global Europe Anticipation Bulletin) titled “When the world finally emerges from the frame of reference of the last sixty years” (see figure) And “The Three Wicked Waves of Summer 2009”. Number 35 insists on the loss of reliable benchmarks and indicators, contrary to optimistic global announcements. The GEAB team also advises us to review the Matrix film to “reflect on the consequences of the manipulation of the sensors and indicators of an environment on the perception of this environment. ”

In issue 36, GEAB stresses that summer 2009 will see the convergence of three “wreck waves” that are particularly destructive and reflect the worsening crisis. These three waves are respectively: unemployment, bankruptcies and the death of the Dollar and the Book.

Same for the G20 or Europe! “Each country is represented by its Minister of Finance and its Governor of the Central Bank, to which are attached several hundred Senior Officials, chosen for their neoliberal convictions within the national and international administrations … No one can become the Governor A Central Bank or the Finance Minister of any of the member countries … without being co-opted by commercial bankers or insurers (who are generally shareholders of the largest banks). “(Source: G20: no chance for any change!)

The dollar reference is coming to an end. Its replacement is increasingly mentioned by the BRIC countries (Brazil, Russia, India, China). China is advancing the use of the IMF’s Special Drawing Rights (SDR), based on a basket of currencies and balancing trade balances in deficit or surplus between nations. Bye-bye the American scam, hello that of the countries BRIC (1). In 2002 for example it was calculated that the dollar had yielded 400 billion in the United States just because it was the international currency. The United States has been living on credit for a long time, but this time it seems that they have gone too far. The world is tired of working for a client who does not pay or who pays in “monkey money and toxic assets”.

The only forcible precipitation of the dollar resides in its detention by a number of creditors still too numerous. All of them try to get rid of them as quickly as possible, massive purchases of land (Cfr. Poor Countries for sale), raw materials (China has made its stock), gold buying, currency shelters … See for example This fact various 134 billion in a suitcase on the Italo-Swiss border! Or this famous video circulating on YouTube concerning the “loss” of 9000 billion dollars to the Fed. Would there be enough trees on earth if we really had to print those 9,000 billion paper notes? For a more technical and detailed analysis, the article Market analysis: we will not go higher! Denotes, among other things, a drop in the price of US Treasury bonds, the main source of US government funding.

The death of the dollar will not be smooth. From “non-negotiable”, the American way of life will become “unenviable”. All the great empires have an end: the Incas, the Greeks, the Romans … All the great dogmas also have an end: money is scarce, money is neutral, all profits are good for the nation or confidence is not restored Not at the height of billions!

Grave? Yes it is … but certainly no worse than what awaits us in a future that is getting closer and closer every day … Let’s see the good side of things, since the beautiful speeches (Mitterrand), warnings (Reeves, IPCC ), Reports (Stern), protocols (Kyoto) and international agreements are not enough, is not a serious crisis the best way to bring us back to reality? This economic-financial crisis is a forced step of the world so that it understands that its system of dominant value is obsolete and hypocritical. An “above ground” value system, totally uprooted from human and natural realities. Unfortunately, it is still the weakest and the most deprived who will suffer.

One can ask the question: how does the money supply evolve in history? Once all idea of ​​the imposition of a dogmatic view on this notion is abandoned, there remains the simple and clear purely experimental view of the concept.

How to measure its evolution? The simplest is undoubtedly to measure it in gold. How much is a monetary unit worth of gold in time? Measuring this value will give us a partial idea of ​​what is going on, Gold being stable as a value in a short time (which is less clear on a long time when its rarity may increase with population if production does not follow) .

Dogma collapses before experimental reality. It does not have to be, it is not related to what is observed. Worse, it is dogma, which, contrary to the reality of economic growth (and therefore, where one finally understands the need for growth in relation to the money supply), causes global societal crises, leading to wars (Leaping forward), or to massive and brutal devaluations when dogma no longer holds, with all the impoverishment of those excluded from the monetary system during the “stable” phases, and the brutal ruin of the rentiers during the correctional phases.

Logically the money supply increases over time, devaluing the currency regularly over time.

On the other hand, what should be noted? This devaluation is brutal, without anticipation, and each time is provoked by a major economic crisis (1st and 2nd World Wars, 1st Choc Petrolier of 1971).

The economic reality is therefore an increase in the money supply (or devaluation of the currency, which is equivalent), the political reality is a firmly dogmatic determination to have a “strong” currency that would not devalue in relation to the ” Now (the palliums).

But what does the monetary dividend offer? To ensure that monetary growth accompanies economic growth on a regular, gradual and smoothed basis over time. The additional monetary dividend reduces the interest of monetary capitalization and annuity to the advantage of asset capitalization, investment, and dynamic capital management. To depreciate a declining monetary capital in relation to the total money supply, we must invest, undertake, arbitrate, play the game of the economy).

In such a system, the debt-credit ration must be reduced to 1 (one can lend only what one has, all the deposits of a bank only creates 100% of credits ), And the monetary dividend which takes the place of monetary creation. The purchases and productive investments of the citizens direct the economy, and the more the State and the Banks, reduced to a non-null but normal role, acceptable. The “risk-free” annuitants disappear naturally (the dividend divides growth, a non-reinvested capital mechanically loses purchasing power in relation to the money supply).

It is not a dogmatic system as we have just seen, it is the mere adaptation to the experimental reality of the historical measure of a given monetary mass. It is a question of espousing the experimental reality and not of imposing an abstract view as “logical” as it may seem, but as catastrophic as it may be before the facts.

Consequently, the consequences of the monetary dividend are not a doctrinal choice of society, it is the mere acceptance of the local, individual implementation of the Global Long-term Economic Law as it is That it appears: Only the choices of supply (investments, enterprises) and demand (purchases) are the fundamental motor, money being only the measure.

Petroleum is at $ 145, a tinge of panic began to spread in the markets this week, and consumers, meanwhile, make a long face like a day without bread.

This is not surprising: the growth figures are also at half-mast, the purchasing power – we never get tired of repeating it – declines, and so on. Until then, all is well, I am about.

Then, on Thursday, the European Central Bank announced a 25 basis point increase in its key rate. And that’s where I start getting lost. Is the attitude of the ECB, as it is often said, responsible for the soaring oil? Is Trichet destined to roast in monetary hells for his struggle against inflation?

Philippe Béchade answered yes to some of these questions, as he wrote in his chronicles on Thursday and Friday. As far as I am concerned, I want to give a reply from Normand: p’têt ‘ben qu’oui … but p’têt’ ben non, too.

The ECB is the cause of many evils (ask European exporting companies, for example) but the rise in oil? It contributes, of course – but speculators, OPEC, the geopolitical situation, the fall in the dollar and the fundamental factors of supply and demand must not be forgotten.

Simone Wapler gave us some more thought in MoneyWeek’s Daily on Wednesday.

“At the beginning of this crisis, last summer, oil was at a reasonable level: $ 70 a barrel,” says Simone. “It was $ 80 a barrel in July 2006. The” collapsed “dollar is only a consequence of the debt of the world’s biggest power, issuing the fiduciary currency in which world trade is traded. Current inflation is not the result of oil, it is the result of an unprecedented monetary issue. This ill-considered monetary issuance was made by the United States. “

“This is still not enough, and this time it was justified by the fact that nobody wanted to pay for the madness of the internet bubble.” Remember: everyone was going to get rich because the 0 and 1 were circulating Freely in networked computers “.

“In order to make a soft landing, the Fed has softened credit conditions, while the other central banks of the world followed.” The revival by consumption, an old French myth, was applied by the world’s leading power. Which inflated the internet bubble served to reinflate a bubble of real estate. Everybody (American) would be able to own its roof “.

“But a low interest rate causes the currency to fall.” When the Fed wanted to raise its rates to resuscitate its dollar, the housing bubble has deflated in turn.

And this is where the ECB stands today: with a galloping monetary mass, in direct contradiction with its original mission (to maintain price stability), and consequently obliged to raise its rates at the worst possible moment. Except that … all this is probably a poultice on a wooden leg – that’s what Adrian Ash thinks of BullionVault.

He was wondering at the beginning of the year, while the Financial Times pointed to J.C. Trichet as “Man of the Year 2007”:

“Will Trichet’s policy at the head of the ECB put an end to inflation in 2008 and extinguish the dazzling rise in gold? We would give more chances of success to a firefighter trying to extinguish a fire By spraying it with kerosene “.

“There is no room for complacency [on inflation],” Mr Trichet said. But what explanation other than complacency for explaining the M3’s soaring increase? But which is not accelerating fast enough to keep pace with monetary expansion in the United States or indecent inflation in Great Britain and China?

“Trichet may seem like a strange choice for ‘Man of the Year 2007’, but he seems to be an ideal choice for” the man of the moment. “It embodies the current air of time in terms of central bank – a moment when one uses words … and small actions.

“By saying one thing while doing another … by helping the inflation forces to come together, when he claimed to firmly oppose it … Trichet summed up the spirit of our financial era even better As Ben Bernanke to the US Federal Reserve “.

The financial crisis that has spread to all financial centers around the world, starting from the initial shock of the subprime crisis in the United States, leads us to question and seek many new explanations that Have probably not yet been proposed. We can ask, for example, “Can a better understanding of finance help avoid financial crises? ”
More precisely, would a better understanding of financial mechanisms, by economic agents who are the authors of the many financial operations carried out daily, be conducive to reducing the “chances” of occurrence of financial crises?

Is early financial education essential?
The President of the Federal Reserve, the central bank of the United States, answers this question without ambiguity: “The subprime crisis illustrates the importance of early financial education”. For Ben Bernanke, a better knowledge of the functioning of the financial mechanisms would be conducive to more balanced decisions regarding the risk / return couple. “The problems in the subprime mortgage market remind us how crucial it is for individuals to acquire financial knowledge at a young age to be better prepared to make decisions and navigate an increasingly complex financial market.
But is access to information not a prerequisite for its treatment? Admittedly, in increasingly complex financial markets, sufficient knowledge is needed to properly collect and process information in order to make the “right decision”. But it must first be possible to dispose of it. Then, only the question of the ability to handle this information rationally can be asked. However, the asymmetry in terms of access to information is a constant on the financial markets. Not all actors have equal access to available information. The asymmetry in the processing capacity of this information will be cumulative to the first form of asymmetry. Here, it is necessary to know before knowing how to do.
In addition, what may be considered an effective choice for some will probably not be for others. Individual rationality and collective rationality do not converge automatically. The actors act in a system. On the one hand, they are interdependent with the decisions taken by the other actors, but on the other they depend on the movements of the system as a whole. The game, on the financial markets, can not always be and everywhere win-win, “win-win”. It can also be win-lose, “Win-loose”. What one gains, the others lose it. Finally, in times of crisis, it can become loser-loser, “Loose-loose”.
It may also be added that behavior, choices and decisions in the financial markets are not only dictated by the rationality of agents in analyzing available information. They are also guided by drives, emotions, “animal spirits” – “animal spirits” according to John Maynard Keynes. In other words, when waves of pessimism succeed waves of optimism, behavior changes and sometimes, what becomes rational is to follow the meaning of collective movement and regardless of the actual content of economic information stricto sensu. Mutual, panurian behavior is in some cases the most rational.

The individual and the system
From microeconomic to macroeconomic levels

Understandably, the understanding of decision processes and financial mechanisms is a highly complex problem to be solved. The decisions of the actors, considered in isolation, fall within a systemic framework which makes the weight of the decision of each one on the whole relatively low. It follows that the sum of the “best individual understandings” and the sum of the individual decisions induced does not guarantee ipso facto that the “collective decision” that will result will be globally effective. There is a long way from the cup to the lips. Economists have long known that the transition from the microeconomic to the macroeconomic level is not without difficulty, even smooth. This is the whole debate, bridge or no bridge between microeconomic and macroeconomic levels.
They also know that in a market economy, and in financial markets in particular, the co-ordination of millions (billion) of individual decisions requires, in order to be effective, close supervision by many institutions. The visible hand of the State and institutions outside the market must accompany the invisible hand of the market so that the sum of individual interests can converge towards the collective interest.

 

The incompleteness of information, that is, the fact that information about the future is more than fragile, merely reinforces the nuances previously put forward. In these circumstances, the level of financial education is limited. We can not reasonably expect miracles as to the implications of better financial education for the public. But there is to be done, nevertheless!
Should we, therefore, renounce an improvement in the financial education of the public? Probably not ! It seems essential to harmoniously combine individual responsibility with collective responsibility in view of the constraints mentioned above.

Thus, in spite of the reservations, the nuance of the argument that it would be enough to improve the knowledge of individuals in financial matters in order to improve the financial markets and the economy, it is essential to promote the development of culture Economic and financial impact of the public. It is for this reason that there has been an Institute for Public Financial Education in France for several months now: IEFP, as there is already a Codice or Council for the development of economic culture, Idies, Institute for Economic and Social Information of the Public.
To take stock of the importance of the development of the financial culture of the public, we will start from the example of the financial crisis, and real, present.
Without attempting to be exhaustive, we will attempt to highlight some key mechanisms that each citizen should necessarily understand in the current financial crisis so that the chances of a new crisis of this type can be reduced in the end in the future.

The economic circumstances are considered disturbing at times when the geopolitical situation is considered serious, and the certain cause and possible solutions have the same address. Central banks can intervene to diminish the effects of the banking crisis. The governments and the associations are trying to minimize the concerns of the economy, in particular the dissimilarities, while the strategic maneuvering and international relations are functioning to decrease the amount of conflict situations.

The existing social crisis is demonstrated through statistical data, the distribution of income between labor and capital. More specifically, it is the value added the product of the activity of transformation of men in the system, a value that is divided between the wage bill and the return on invested capital. The financiers sometimes have some means and show goodwill towards the banks, so it is obvious that the states have a strong-minded but inadequate will to control the social crisis with limited means. In the area of ​​geopolitical conflicts, it would take only a little less destructive will and a little more understanding to bound conflicts.

The main economic problem is the sectoral exchange of money, with a attentiveness in high-income, high-value activities and notional operations, with unwarranted returns, so what dries up whole segments of society with social and cultural needs to be supported. The portion of labor income has declined, but the amount is the worst since it masks two realities, where the first one is the disproportion in wages, as the fall in labor income is due to social clearance, while high earnings have kept up well. The evolution of the distribution between income from capital and labor is ineffective in several respects.

In the meantime, creation is increasing and globalization is not a unscrupulous mechanism if we take into account the idea that one can rebalance by the traditional ways the payment of the work is an illusion. Additionally, all predictable solutions have become out of action, except to push citizens into a major social crisis. In fact, the growth of principal income is based on the awareness of high value-added activities. The only certainty we have is that income from profit has increased because the returns to capital are tangible, but there are also restrictions, the symptom of which is highly exposed, the subprime crisis with so called natural effects, while insolvency and reduction of profits occurred since the financial suction of the economy has found its restrictions.

For the system to adopt a new resolution, it would not be a class fight, but an intellectual fight that contains figurative, coherent, and moral struggle. Instinctively, leaders, academics, media, economists cannot go against their interests even if some repentance produces them, buying a good integrity in good words or charitable. An option that remains out of bounds is not debated and which, to be considered, supposes a movement of greatness of public opinion and a powerful media intervention. The real objective of a restructure of the system would be to reload the areas of poverty by monetary injection, but for the middle and working classes, who struggle to get out of it, it is individualism. There is a shortage of civic awareness, of positive depiction combined with complete change of a desire to do good for others as well as for oneself.

Financial institutions are reluctant today to engage in new credit operations in favor of the most creditworthy debtors, banks even refusing to lend to one another despite the often massive injections of liquidity provided by the states.
This aversion to the risk – incomprehensible and even scandalous – coming from establishments which find themselves in such a position because of the very risky risks incurred in the recent past – is in fact derived from the “toxic” assets held by these same institutions, ‘It is impossible for them to value today! In these circumstances, what bank would lend credits to one of its sisters who is not in a position to quantify the state of its losses or – at least – of its liabilities? The interbank credit market, ie loans between banks themselves, is therefore not likely to resurface once a certain number of players can only estimate valuation very randomly – The degree of toxicity – of the securities held, despite the various extensions, guarantees and credits granted by the States!
Thus, despite the fact that some consumers still manage to benefit from certain loans, the economy can not be restarted without a frank and generous recovery in the credit market even if a certain percentage of these future debtors are inevitably lacking … Paralysis Of the credit market forces our economies to a stalemate that is prompting our Governments to charge companies that have received public funds that they can not use by making new loans. Because the financial institutions affected – that is to say almost all of the world’s so-called developed institutions – prefer to cling to the tangible and real assets they still have, rather than making them available to other banks or companies a credit.
Worse still, this aversion to risk is in no way diminished or moderated by the massive State aids because these funds are instead placed by the banks that benefit from them in insubmersible assets, such as the Treasury bills, in place of This situation becomes totally blocked when the banks of a country are asked by an institution in a foreign country if it is true, if it is already very difficult to Quantify the liabilities of an establishment located in the same country, it is impossible to gauge the losses of a foreign establishment!
Adam Smith (1723-1790) described a similar situation in which the English and Scottish merchants preferred to abstain from engaging in uncertain operations American colonies deemed too risky in spite of much better returns than their local operations. These merchants therefore favored less profitable but safer operations, such as financial institutions which today invest in government bonds with insignificant returns rather than engaging in new, more remunerative loans, Certain degree of risk.
However, the understandable mistrust of these merchants resulted in local investments that benefited the country directly, with national enrichment and more jobs. According to the famous metaphor of Smith at the time, it was the “invisible hand” (ie, God or Providence) that urged these merchants to invest in the national economy. Nowadays, our analysts would more prosaically talk about market theory – in this case risk aversion – instead of Smith’s mystical qualification to explain the fear of these traders to place their holdings in distant lands.
Similarly, there is no invisible hand at work with our current bankers: The change of personnel – even at the highest level – would not lessen this reluctance because replacing a CEO or a board of directors would not eliminate the assets rotten! Suspicion, mistrust and fear are companions that our bankers are not about to get rid of, despite the taxpayer’s generosity!

Unexpectedly, while the probable economic growth of the Eurozone countries is rather low compared to that of the United States, and that the effectiveness of companies in the euro area is poorer than that observed in the United States, the United Kingdom and Japan, the euro appreciates against the dollar, the yen and the currencies of emerging economies such as China, India, Russian federation and South Korea, except Brazil. By surpassing the 1.50 dollars for one euro, and even 1.52 dollar over one euro, the single European currency continues to rise relative to the green one.

More obviously and more important is the constant appreciation of the effective exchange rate since 2002 in the Eurozone countries. The effective exchange rate of a currency, dissimilar to bilateral exchange rates between two currencies, measures the value of a currency in relation to a biased currency basket, therefore it is a better indicator of the attractiveness of an economic zone, and its differences, although qualitatively indistinguishable, are much less remarkable but still substantial. Among the explanations, one can distinguish between cyclical and repeated causes of structural, non-cyclical causes.

From a cyclical point of view, worries about the US economy can be emphasized since the subprime mortgage crisis. The reactions of the Fed result in successive decreases in interest rates and deterrent the holding of certain dollar assets. From a structural point of view, the factors of the rise of the euro and the devaluation of the dollar are more difficult to establish with certainty. The weakness of potential growth in the euro area should be a restrictive to holding assets in euros, particularly since the prospects for speeding up productivity gains are low, so that demographic prospects show an aging population.

One of the explanations would be that in this global economy where capital is increasingly moving, and increasingly fast, in search of ever higher yields, in spite of the costs related with the financial bubbles they create and the consequences on the economy, the real demand for euro-denominated assets continues to go faster, while at the same time the nature of these investment flows in euros would be differentiated.

In order to differentiate their asset portfolios, central banks buy large quantities of euro-denominated bonds. They would be influenced by the trustworthiness of the ECB’s anti-inflationary monetary policy and by the lack of most important economic disproportions comparable to those of the US economy. Additionally, private investors would be strongly demanding euro-denominated shares, which would result in a weak correlation between share prices of large companies and the overall state of the economy of Eurozone. These highly internationalized firms would see their profitability deviate from that of mainly domestic firms, so they would consequently barely or not be affected by the poor growth of the Eurozone economy as a whole.

Under these circumstances, there would be a previously determined surplus of the demand for euro assets by non-resident agents, in particular central banks. This type of deficit in the supply of assets in euros for non-resident agents can be described by the outer surplus of the euro area. The combination of the external surplus in Eurozone and the increase in ex-ante demand for assets denominated in euros is not remarkably replicated in the appreciation of the single currency, so the euro these days takes the form of a new international reserve currency for central banks, which traditionally invest their reserves in deposits and risk-free bonds, and for private agents since stocks and bonds are of long-term securities.

 

The current financial crisis would be the delayed result of a monetary policy that is permanently and unreasonably expansionary. The continued policy of low-interest rates, attached to financial innovations supported by the Ponzi scheme mechanisms, would be the source of troublesome underlying forces that allows subjects to arise from a crisis but accepts to enter another financial crisis, far along and in a different place.

It is the fight against the overwhelming effects of the technology bubble at the turn of the century, with excessive use of monetary expansion, which gradually produced the conditions for the crisis of the real-estate market in the United States during 2006 and 2007.

It is indeed the mixture of an excessively and durably expansionary monetary policy and the inevitable consequences of the Ponzi scheme, based on financial innovations, applied at structured products, which is answerable for the current market crisis.

This dynamic is therefore prompting, for the detonator, the expansionary monetary policy applied to fight against a past financial crisis. The conditions for its spread from one asset market to another are linked to financial innovations and Ponzi-scheme.

The financial crisis that occurred in 2007 was believed to be caused by an unreasonably expansionary monetary policy that had been in place for some time. This policy included low-interest rates and financial innovations that relied heavily on Ponzi scheme mechanisms. While this policy initially helped to combat the effects of the technology bubble in the early 2000s, it ultimately led to the crisis in the US real estate market in 2006 and 2007.

The combination of the long-standing expansionary monetary policy and the Ponzi scheme-based financial innovations in structured products is responsible for the current market crisis. The expansionary monetary policy was used to fight a previous financial crisis, but its continued use created conditions that allowed the crisis to spread from one asset market to another.

Central banks are now faced with the challenge of preventing a systemic crisis of banks while also avoiding the conditions that could lead to the next crisis. They must inject the necessary liquidity to prevent bank defaults and credit crunches, but they must also be careful not to reveal the conditions that could generate the next crisis.

In summary, the current financial crisis is the delayed result of a monetary policy that has been permanently and unreasonably expansionary. The use of financial innovations based on Ponzi scheme mechanisms has compounded this issue, creating conditions that allowed the crisis to spread from one market to another. Central banks must carefully navigate this situation to prevent future crises.

To prevent a systemic crisis of banks, central banks must inject liquidity to prevent bank defaults and credit crunches. However, they must also avoid revealing the conditions that could lead to the next crisis. In addition to short-term interest rates, economic policies can use other mechanisms to combat excessive leverage or asset price bubbles, such as higher reserve requirements on certain credit categories, management in the cycle of principal ratios of banks, and the taxation of certain capital gains.

The maintenance of an expansionary monetary policy that facilitates debt leads to the overpricing of assets in different markets, creating a speculative bubble that requires liquidity to feed the market through an expansionary monetary policy. In response to the newly emerging crisis of sharp corporate defaults, the US central banks, the Federal Reserve, and the European Central Bank have pursued very expansionary monetary policies, particularly in the United States to prevent a drying up of the credit market.

This policy, while avoiding the worst-case scenario in the short term, has led to about two years of the holdup, a strong outpouring in household debt, especially secured loans for real estate purchases, and then for businesses. The increase in everyday mortgage debt fuels demand in the real estate market, inevitably raising property prices. Monetary authorities must now take into consideration the relative development of indebtedness and prices of financial assets and properties, rather than simply regulating inflation rates in the market for goods and services.

In conclusion, central banks must be careful to prevent a systemic crisis of banks, inject necessary liquidity to prevent defaults and credit crunches, and avoid revealing the conditions that could lead to the next crisis. Economic policies can use various mechanisms other than short-term interest rates to combat excessive leverage or asset price bubbles, and monetary authorities must take into consideration the relative development of indebtedness and prices of financial assets and properties.

The Eurozone faced challenges due to the complexity arising from productive concentrations and different country strategies. The four largest countries in the monetary union were the most important, with significant differences between them. Despite disruptions from the subprime crisis, there were many reasons for a recommencement of a clear appreciation of the euro against the US dollar and the Japanese yen.

When a country has imperfectly distinguished, refined production, its exporters are forced to decrease their prices when the country’s currency appreciates recollecting their market shares. Germany had the highest increase in the ratio related to the export price over the unit wage cost of all countries, showing its strongest product diversification. The central American financial institution, the Federal Reserve, was likely to stay more responsive than the European Central Bank in the event of an economic slowdown or financial crisis, confirming current developments in monetary policy and market outlooks.

The slowdown in growth was expected to be stronger and more durable in the United States than in the Eurozone. The US witnessed a collapse in construction activity due to the very high stock of unsold houses, while Eurozone countries experienced a slight weakening in construction activity after a period of strong growth. The United States found it difficult to sell securitized assets to the rest of the world as non-residents were less attracted to assets issued in that country. Additionally, emerging countries accepted a faster depreciation of the dollar, making it increasingly difficult to stabilize.

Japan cannot continue regular processes with a strong yen. With the decline in the real income of Japanese households, the only drivers of demand were exports and associated investments, which weakened with the US slowdown. Germany’s big burden of imports came from outsourcing to emerging countries, taking advantage more from the drop in import prices due to the appreciation of the euro.

The appreciation of the euro reduced the import prices of the four biggest Eurozone countries during 2002 and 2003, so the change in the amount of the sensitivity of exports to changes in the euro is a function of concentration. Countries that concentrate on distinguished, high-end products typically have lower export price elasticity and lower export trend growth. The appreciation of the euro during 2002 and 2003 also affected the markets of the other three countries, i.e. France, Italy, and later Spain, much more than it was the case in Germany. This has shown that there is a rule in this process, where, if a particular country has a big, progressively growing nontradable service sector, it is to some extent resistant to fluctuations in the euro. The differentiation of the Spanish industry and market shows that it is definitely not the case in that country.