Financial system crisis

Severe disruptions, up to and including complete collapse, breakdown of the financial system in a currency area or in the world as a whole. – Distortions – in one segment of the financial market, as in the case of subprime mortgage-backed securities in the summer of 2007; such disruptions inevitably spill over in some way to other segments of the financial market and, as in the case of the subprime crisis, also have far-reaching implications for a long period. – If this results in a general loss of confidence and a sharp drop in stock market prices, only the state can bring about a turnaround and avoid the complete collapse of the financial system by means of an appropriately authorized guarantee fund. As the subprime crisis has shown, even individual central banks are overwhelmed in such a situation. Even the generous provision of liquidity on its own can hardly restore confidence in the smooth running of the financial markets. – This is particularly true of the global turmoil that followed the subprime crisis from 2007 onward, the individual stages of which are described step by step in the Financial Stability Report 2009. Ultimately, the
The causes of this crisis were an excessive short-term orientation in the financial system. This also had a strong impact on production. As a result, the global economic output level of 2008 could not be reached again until 2013 at the earliest. According to estimates, Germany’s production potential lost two percent. All governments together spent more than a quarter of the global gross national product on rescue packages to overcome the financial crisis. – The steps taken in the course of quantitative easing to cope with this crisis meant that in most countries savers had to pay the lion’s share of the follow-up costs through dietary yields. The governments of many countries had to bail out failing banks, which increased public debt and even brought some countries (Ireland crisis) to the brink of national bankruptcy. Moreover, the money spent was no longer available for other purposes – such as education, investment in infrastructure. – See contagion effects, bank-based, banking crisis, carry trades, diet yield, three-year tender, deposit insurance, European, Elisabeth question, financial crisis, avoidability, financial crisis, burdens, financial market disciplining function, financial market collapse, financial market stability, Financial Market Stabilization Act, fear thesis, guarantee fund, information gap, credit risk, credit guidelines, lending principle, crisis, systemic, crisis, central bank-induced, collateral crisis, crisis burden-sharing program, liquidity pool, mark-to-model approach, memorandum of understanding, Murphy’s law, emergency liquidity assistance, procyclicality, quantitative easing, risk culture, run, play money, sovereign debt crisis, stability fund, European, systemic conflict, financial market, stealth policy, submarine effect, loss of confidence, lemon trade. – Cf. ECB Monthly Report of November 2007, pp. 18 ff. (transmission of the subprime crisis to the individual segments of the financial market), ECB Monthly Report of April 2008, pp. 95 f. (principles adopted by the Ecofin Council in October 2007), Deutsche Bundesbank Monthly Report of January 2009, pp. 26 et seq. (quantitative coverage of the financial crisis in the Bank Lending Survey; overviews), ECB Monthly Report of January 2009, p. 18 et seq. (portfolio shifts in the wake of the financial market crisis), ECB Annual Report 2008, p. 27 et seq. (effects on M3; p. 37 et seq: Financial crisis and money market; overviews; pp. 113 ff.: monetary policy measures), ECB Monthly Report June 2009, pp. 109 f (collapse of foreign trade in the euro area as a result of the financial crisis; overviews), Deutsche Bundesbank Monthly Report June 2009, pp. 56 f. (banknote demand during the financial crisis), Deutsche Bundesbank Monthly Report September 2009, pp. 17 et seq. (lending during the financial crisis; overviews), Monthly Report of the Deutsche Bundesbank of October 2009, pp. 22 et seq. (government investment requires a profitability analysis even during the financial crisis), Monthly Report of the Deutsche Bundesbank of December 2009, p. 27 (damage to potential output), ECB Annual Report 2009, pp. 81 et seq. (government support measures; overviews, references), Financial Stability Report 2009, p. 61 (loss estimate of the financial crisis following the subprime crisis), ECB Monthly Report of January 2010, p. 67 et seq. (ECB monetary policy in the financial crisis; presentation and assessment of individual measures), ECB Monthly Report of April 2010, p. 77 et seq. (summary assessment of the support measures; many overviews; references), Deutsche Bundesbank Monthly Report of May 2010, pp. 42 ff. (effects of the financial crisis on companies, households and the government), ECB Monthly Report of June 2010, pp. 108 ff. (effects of the financial crisis in particular on capital flows within the euro area; overviews), ECB Monthly Report of July 2010, pp. 93 ff. (Impact of the financial crisis on countries in Central and Eastern Europe; many overviews), ECB Monthly Bulletin of October 2010, p. 17 ff. (Impact of the financial crisis on global trade), ECB Monthly Bulletin of October 2010, p. 63 ff. (Measures taken by the ECB during the financial crisis: detailed account; many overviews), ECB Annual Report 2010, p. 174 ff. (ECB’s involvement in overcoming the financial crisis); ECB Monthly Report of January 2011, pp. 93 ff. (effects of the financial crisis on political cooperation in Europe; individual impulses for better international cooperation), ECB Monthly Report of February 2011, pp. 66 ff. (comparison with crises from 1974 onward; many overviews), BaFin Annual Report 2010, pp. 19 ff. (chronology of events in 2010), ECB Monthly Report of June 2010, pp. 105 ff (impact of the financial crisis on Central and Eastern European countries; overviews), ECB Monthly Report of October 2011, p. 107 ff (mapping of the financial crisis in national accounts), ECB Monthly Report of May 2012 (detailed, broad and in-depth comparative account of the recent financial crises, in Japan, in the U.S. and in EMU; many overviews), BaFin Annual Report 2011, pp. 21 et seq. (chronology of events in 2011), Financial Stability Report 2012, pp. 20 et seq. (crisis of confidence in the EMU and its causes), 32 et seq.: the German financial system in the financial crisis; many overviews), Monthly Report of the Deutsche Bundesbank of January 2014, pp. 41 et seq. (overcoming the crisis of confidence triggered by the financial crisis; many overviews; 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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https://de.wikipedia.org/wiki/Gerhard_Ernst_Merk
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