Experience shows that a crisis is indicated on the financial market as a whole by noticeable financial euphoria and corresponding expectations. In detail, one can observe a number of regularly occurring circumstances, namely – the granting of credit is generous (lenders provide easy credit), – asset prices rise abnormally (investors bid up asst prices) and – investments are made which do not direct the scarce resources (limited resources) to the best use (businesses invest unwisely). – In this way, spending increases and, sooner or later, households and businesses accumulate debt (debt builds up). – See downturn, bear market, expectations, inappropriate, early warning systems, business cycle diagnosis, order capacity index, confidence indicator. – Cf. ECB Monthly Bulletin, November 2010, p. 75 (detailed presentation; indicators for early detection; many references).
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University Professor Dr. Gerhard Merk, Dipl.rer.pol., Dipl.rer.oec.
Professor Dr. Eckehard Krah, Dipl.rer.pol.
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