The background of the current banking crisis

Gregor Hochreiter, 29.02.2008

• • •
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The backgrounds of the current banking crisis
leading banks also does not seem to tear down. The growing uncertainty about the
financial situation of financial institutions has also undermined the mutual tr
ust of banks and lending slowed considerably. To bridge the perceived threat of
liquidity bottleneck to see the central banks forced to make the banking system
increasingly higher doses of liquidity. The fear of a severe liquidity crisis an
d a so-called credit crunch is going around. This is to prevent with all means a
vailable, otherwise there could be a pronounced recession. Or so argue central b
ankers, economists and economic policy makers. In this analysis, we want to take
the phenomenon of the liquidity crisis more closely. Our observations will show
that the current banking crisis is a special case of a general economic phenome
non, namely the "queue". To gain a better understanding of the current dynamics
in the financial markets, we will
D
ie banking and financial crisis the world holds its breath for months. Massive l
osses shook the stock markets and the surge of bad news from the
first
with
the
underlying
economic
Laws deal.
Pricing
There are basically two ways to get those goods that you want to consume yoursel
f. Either one that is solely her own and lives in self-sufficient self-sufficien
cy. In this case, all goods have direct use value for that person and there is n
ot even a market transaction between two people and therefore not to a price. Or
one's own goods exchanged for those goods which one would rather have. This is
only possible on condition that the other exchange partner, the resulting proper
ty appreciates more than the hold. Conversely, of course as that of an exchange
partner abandoned the lower estimates than that obtained. For, generally speakin
g, one can define a price as a trade relationship between two goods. Pricing the
refore requires the exchange of goods between two persons. One can therefore say
that the formation of a prize is an expression of mutual appreciation.
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The backgrounds of the current banking crisis If you want to swap the self-produ
ced goods, measure it to a higher exchange as a use. This property gets its valu
e as a potential bargaining chip, which indirectly - satisfaction with the "deto
ur" of exchange - their own needs. In a money economy with the generally accepte
d medium of exchange money is another "detour" interposed, which was established
but only because of its favorable to the people over time. A cash economy facil
itates the exchange relationships between people, making possible a greater divi
sion of labor and a higher standard of material prosperity is attainable. The pu
rchase or sale is therefore a special form of exchange, namely the exchange or f
or money. And whenever two people decide to make a purchase or sale, comes about
a cash prize. Furthermore, of course, hope that the purchase or sale of both si
des to profit from this business. Otherwise, they would grant the said transacti
on does not even agree. The amount of the offered or requested price depends on
subjective factors. This includes different from person to person through the qu
alitative assessment of the usefulness in the discussion of price phenomena usua
lly occurs in the place of the terms buyer and seller, the terms "provider and b
uyer".€In one provider, we mean a person who wants to sell a good for money. As
customers we call on the other hand the person who wants to buy a good for money
. Abstract formulated then one uses the concepts of supply and demand, with one
should always be aware that behind the term "offer" a variety of vendors, behind
the term "demand" a variety of buyers. There are always real people who offer g
oods or ask, and never any mathematical formulas that people beraufen his multif
aceted personality. to buy or sell coming good. No less important are the emotio
nal factors that go into the Wertbeimessung. His family heirloom is one, if ever
, want to sell only very expensive, while one affected with negative memories ev
en good releases free of charge, although it objectively, could be used more pro
fitably.
Supply and demand
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The backgrounds of the current banking crisis, it is the nature of things, that
the seller hopes to get the highest possible price for his goods offered. Conver
sely, the buyer prefers to pay the lowest possible price. On the market place so
conflicting interests meet each other here on a high asking price hopeful vendo
rs there to a favorable price-seeking buyers. An important remark is appropriate
at this point: Each vendor has different ideas about that price, he would at le
ast get to be good. Those who must sell urgently, is content with a lower sellin
g price. fond of a good one separates the other hand, only for a relatively high
compensation, a high
Price 350 300 250 200 150 100 50 0 1 70 2 1990 3110 4260240210 170 140 150 160 1
40 200 120 110 60 5 quantity demand - Höchstkaufpreis offer - minimum selling 6
7 8 9 10 280
Loss outweigh the incurred through the issuance of the goods. On the other hand,
buy-side is the amount of special interest for our considerations, which the bu
yer is to pay more than ready. This price is called "Höchstkaufpreis. If the ask
ing price is about it, then draws the possible buyers, the alternative use of hi
s money because he, the question has literally not worth much. The so far been s
aid, we can summarize pictorially in the following graph:
M indestverkaufspreis - Höchstkaufpreis
Selling price. The lower threshold below that of the individual seller is willin
g to not sell, we call the "minimum price". the buyers are not willing to offer
it to the minimum selling price, reserves
Seller prefer the good of his own property. The under-compensation he would not
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The backgrounds of the current banking crisis we are dealing in this example wit
h eight potential sellers (supply) and nine potential buyers (demand). On the ve
rtical y-axis, the price is registered on the horizontal x-axis, however, the nu
mber of the offered or requested items, such as tickets to a football match. The
supply curve rises from left to right. The higher the price offered, the more l
ikely people are unwilling to sell an asset. This does not mean that everyone wo
uld be bought if the price offered is set sufficiently high. Many people would s
ell their tickets in our example for all the money in the world and therefore th
e supply curve breaks off after only eight companies. For all other ticket holde
rs to visit this football match is so important that they waive it under any cir
cumstances. The different preferences of providers willing to symbolize the eigh
t held in blue diamonds. SO Sales sold a his card, once for at least € 70 is rep
laced. Its minimum price is thus € 70 Seller 2 shall deliver his card as soon as
at least € are offered 90, and the seller 8 separates only from a minimum bid o
f € 280 will decrease from its demand curve, however, from left to right, with t
he pink colored squares the Höchstkaufpreis of each buyer to make visible. The n
egative slope of the demand curve symbolizes the general fact that rising prices
with declining demand. The cheaper one is good, the more likely we are willing
to buy. In this example, Buyer shall submit a maximum of € 260 for the card on t
he table, while buyers will spend more than € 2 240th Buyer 9 provides his perso
nal pain threshold already come with a price € 60th€The Höchstkaufpreise for the
nine potential buyers are therefore: € 260, € 240, € 210, € 170, € 150, € 140,
€ 120, € 110, € 60 To clarify the mutual exclusivity of supply and demand, we se
t the preferences of the 17 persons in the following table on a second way dar.
The first column contains the price in € 10 increments, the second and third col
umn of the respective supply and the particular demand at that price. Each line
is thus on the supply and demand in the match card. The minimum selling prices f
or the eight people are interested in selling in ascending order: € 70, € 90, €
110, € 140, € 150, € 160, € 200 and € 280
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The backgrounds of the current banking crisis first column starting from. At a p
rice of € 60 would not sell a single provider, because the minimum retail price
of each supplier on that amount. On the other 9 people ask for a card, as the de
mand of no less than Höchstkaufpreis constitute 60 €. At a price of € 200 on the
other hand 7 providers are willing to sell their card and that all those whose
minimum selling price exceeds € 200 (not all sellers, except for Seller 8). On t
he demand side can be found at this level only three buyers willing purchasers,
and indeed all whose Höchstkaufpreis € 200 or more (all buyers other than buyer
1,2 and 3):
Price 50 60 70 80 90 100 110 120 130 range 0 0 1 1 2 2 3 3 3 9 9 demand 8 8 8 8
8 7 6 140 150 160 170 180 190 200 210 220 230 240 250 260 270 280 290 300 4 5 6
6 6 6 7 7 7 7 7 7 7 7 8 8 8 6 5 4 4 3 3 3 3 2 2 2 1 1 0 0 0 0
We take this as a "law of supply and demand" known relationship together, the lo
wer the price, the lower the demand and the higher the demand. The higher the pr
ice, the higher the supply and the lower the demand.
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The backgrounds of the current banking crisis
The pricing process
As a next step we want to resolve the question of how the pricing in the market
expire exactly what is meant by the market and why it ever comes to a market pri
ce. We shall see that the market price clears the market and satisfy all the buy
ers and sellers. Under market-clearing condition that is to be understood, where
the preferences given to all providers and demand unsold no offer and no unmet
demand longer exist.
Price 350 300 250 200 150 100 50 0 1 70 260
as non-market evacuating because some buyers and sellers given their minimum sal
es and Höchstkaufpreise would promote a change in the market price? Let to this
end, a look at our graph, which processes the minimum sales price and Höchstkauf
preise of the 17 entrants at this point graphically:
Minimum selling price - Höchstkaufpreis
280 240 210 110 3 4 170 140 150 160 140 200 120 110 60 5 quantity demand - Höchs
tkaufpreis offer - minimum selling 6 7 8 9 10
Imagine an empty square in the early morning before. Only slowly, the potential
buyers and sellers are entering the marketplace. A lot of activity developing. A
salesman with a relatively high minimum sales price for praising his product
90 2
€ 200. What dynamics solves this offer for the 16 other market participants, inc
luding 7 other sellers and buyers from nine possible? If, at a price of € 200 fo
r the purchase and sale or actually this first offer turns out to be unstable, t
he red line we have drawn for illustrative purposes ancillary to the € 200 price
line. With a potential sale price of € 200 would thus total of 7 sellers willin
g to share their
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The backgrounds of the current banking crisis to sell match card. Only seller No
. 8 with a minimum retail price of € 280 offers his card is not for sale. Since
every seller needs a buyer, we must obviously also the
Price 350 300 250 200 150 100 50 0 1 70 2 90 3110 4260240210 170 140 150 160 140
200 120 110 60 5 quantity demand - Höchstkaufpreis offer - minimum selling 6 7
8 9 10 280
Seller
their
Minimum price
themselves
below
of
current offer price of € 200 is to push the price. Seller No. 6 with a minimum r
etail price of € 160 calls this price as a new offer. What is the consequence?
M indestverkaufspreis - Höchstkaufpreis
Buy-side view. At a price of € 200 would strike a buyer, 2 and 3 because their H
öchstkaufpreis is about 200 €.€The other six potential buyers, conduct themselve
s in this price decline, because they do not want to spend so much money. Thus 7
is offered match tickets to a demand of only 3 cards, so there is an oversupply
of 4 cards.
In other words, wrangle, 7 Seller for the favor of only three buyers. It raises
the question of which 3 sellers come to the train and what not. As we have alrea
dy explained, require all sellers not the same minimum sale price. Consequently,
those who start
On the one hand, draws No. 7 seller from the market because for € 160 he would r
ather own the stadium. On the other hand, reported an additional buyer, buyer No
. 4, of his interest in buying. The demand gap has shrunk from four cards on two
cards, instead of 7 sellers offer their card only six are for sale, instead of
three buyers now show four buyers
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The backgrounds of the current banking crisis credible their buying interest. Ne
vertheless, this situation remains unstable. Therefore seller lowers the price o
f a No. 4 again on 150th € This reduction is pressing No. 5 seller from the mark
et, while a new buyer for € 150, a map would buy at that price. This further low
ering bridges the gap between supply and demand completely. Supply and demand in
tersect and the intersection marks the market-clearing conditions. Given the pre
ferences of 17 people is in our example, the market-clearing price at € 150 and
the market-clearing quantity for 5 pieces. The height of the market price thus d
epends on supply and demand, more specifically on the individual preferences of
buyers and sellers. The higher the price of a commodity, the more scarce this go
od is relative to our needs. In other words, because we value this good, we're r
eady for the acquisition of such property to dispense with many other goods. Con
versely speaking, the lower the price of a commodity, the richer it is relative
to our present needs. Therefore, decreases our readiness for the purchase of an
additional unit of that good to many of his personal bid € 60 draws a single sel
ler from behind the stove, because no one wants to give this price to the stadiu
m attempt. On the other hand, buyers want to buy all nine buyer at that price a
card. We are dealing again with a gap between sellers and buyers, and this time
exceeds the number of buyers, the number of vendors. How this gap will be close?
 For completeness, we also need to be clarified why the price does not fall furt
her or what would happen if buyers No.9 take the first word. forego other goods.
A high market price can be interpreted, therefore the effect that this good in
a society is relatively scarce, while a good place with a comparatively low mark
et value is in abundance.
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The backgrounds of the current banking crisis now three ticket holders selling t
heir interest and the excess demand is reduced from 9 to 5 To complete the exces
s demand
260 280 240 210 110 3 4170140150 160 140 200 120 110 60 5 quantity demand - Höch
stkaufpreis offer - minimum selling 6 7 8 9 10
Minimum selling price - Höchstkaufpreis
Price 350 300 250 200 150 100 50 0 1 70 2 90
tape, is evidently a further rise in price on € 150 The buyer No 8, 7 and 6 are
thus driven out of business because these three people do not want to spend so m
uch money for the offered match card. The additional price increase by a further
€ 40 encouraged, however, the seller No.4 and 5, to part with their tickets.
Was it before the sellers with a relatively low minimum selling price, which pus
hed the market-clearing price does not, there are now the buyer with a comparati
vely high
Price 350 300 250 200 150 100 50 0 1 70 2260
Minimum selling price - Höchstkaufpreis
280 240 210 110 3 4 170 140 150 160 140 200 120 110 60 5 quantity demand - Höchs
tkaufpreis offer - minimum selling 6 7 8 9 10
Höchstkaufpreis, push the price up. Buyer No. 8, which is higher Höchstkaufpreis
€ 50 as the buyer of No. 9, provides € 110 for a card. In response to the new p
rice level buyer withdraws No. 9 be buying interest. On the provider side of the
show whether the increase in price
90
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The backgrounds of the current banking crisis we see,€ensure that the highly ind
ividual needs of buyers and sellers ensure that the price levels off right there
, where there are not too many buyers are still too many sellers. Such a surplus
whether on the buyers or sellers, as it would dissolve by itself. Short-term si
tuations of imbalance, where the price is either "too high" or "too low" are the
refore perfectly observed. But the dynamics seem to mean that it is at this misj
udgment only short-term phenomena. It is obvious that those persons who have pur
chased a card, are better off by the successful completion of the purchase. Othe
rwise they would have agreed to purchase at these conditions does not arise. The
same applies mutatis mutandis to the seller. still remains to be clarified whet
her those persons who have not come to the train, do not go with hanging heads b
ack home. The answer is clearly no, including the purchase or sale of a property
is only on the condition that one of them gain an advantage. This advantage is
given to a buyer but only if below the market price for the buyer of the
Market volume quantity market demand - buyers bid - Seller
Höchstkaufpreises individual or for the seller above the minimum sale price. For
not the purchase or sale is in itself beneficial, but only one purchase or sale
, the terms of the subjective perspective of the buyer or seller are deemed prof
itable. In the ballast and subsequently we will be with well-known graphic that
represents the pricing process just described schematically.
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The backgrounds of the current banking crisis
Never
should
forget
are
that
this
graphic
Price
Offer - Seller
Representation is a useful simplification and under no circumstances, the realit
y-one-one reflects.
heightened supply market demand - Buyer
Price changes
After the preferences of the people of a permanent change are subject to the Höc
hstkaufpreise and minimum sale prices are subject to permanent change, which in
turn influence the market-clearing conditions - market price and quantity transf
ormed - right. The following graphs represent the four possible changes. 1) incr
easing the supply decreases, the minimum sale price of the provider because the
provider expresses the estate less value to attach to this one in and therefore
reduce their appreciation of the minimum selling prices. Shift change
Amount of market volume
The classic reason for the increase in supply is found in the expansion of produ
ction capacity. If more goods are produced, then the additional units produced w
ill be accommodated on the market only at a lower price, as was brought to the o
ld level of production to the lower production as much as possible to the man. a
llows the reduction of the minimum sale price it is now additional borrowers who
se Höchstkaufpreis sometimes was too low to acquire the property. In an extensio
n of the bid accordingly decreases the market price,
Supply curve to the right below.
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The backgrounds of the current banking crisis during the transposed quantity of
goods increases. The decline in market price expresses the fact that this commod
ity has become more abundant. In our example, however more match tickets would b
e offered for resale, because the game has lost importance over time. Contrary t
o expectations, the team lost a few games and in the meantime instead of a tense
final of the championship is suddenly only an ordinary
Market Quantity Quantity
Price
sunken offer
Offer - Seller
Market demand - Buyer
Championship game. The number of offered match tickets goes to the example of 2)
decline the offer at a reduction in the bid to increase the minimum selling ven
dor, so back when the match will be more exciting than expected, so less match t
icket holders want to sell the card at all, and those selling but want a higher
minimum sales price demand. Or if it is caused by bad weather or the food produc
tion, a company negatively affect its
supply curve moves to the left. The estate is scarcer and the market price rises
, because the lower range is sold to those buyers, the minimum selling price is
high enough to clear the market.
Production capacity limits.
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The backgrounds of the current banking crisis 3) increase in demand if the deman
d increases for a commodity because he has increased the appreciation of the goo
d in the eyes of the buyer or because additional people want to buy the good, th
en this is expressed in an increase in the Höchstkaufpreise . Because of the hig
her value buyers are now willing to pay a higher price. The demand curve shifts
to the right. For higher price and more goods are sold, because some providers,
the minimum selling price was formerly located above the market price to sell at
the higher price will be available.
Price
The soccer match is replaced due to surprising results of both teams in the rece
nt past, a higher priority. Because of this change to more people than it used t
o attend the match in the stadium. Or a tourist region enjoys a wider popularity
. The prices start rising and the bed supply - is growing with construction work
had delayed -. 4) reduction in demand should be a good demand for less, because
for example the football match promises less stress, this leads to a shift in d
emand curve to the left
Offer - Seller
below.
This
Shift
is
the
Reduction
the
Höchstkaufpreise based. It sold fewer goods at a lower price.
Market price increase in demand
Clearly, both the minimum sale price and the Höchstkaufpreise not a static, beca
use the preferences of the people are never constant. This is also the prices
Demand - buyers market quantity quantity
constantly in motion and give the relative scarcity of goods express.
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The backgrounds of the current banking crisis
Price
Offer - Seller
Of butter mountains and milk lakes
How can we explain these phenomena, having so far nothing
Market price
increased demand
has alluded to such structural faults? Let us start with the butter mountains an
d milk lakes. In our explanation of how the price system, we set ourselves apart
even with the case of a "high" bid price.
Demand - buyers market quantity quantity
If the price demanded by a seller set too high, want more vendors selling and bu
ying as customers. Since some providers, however, would be content with a lower
selling price, the sale price that vendors button until the "inappropriate" sell
ers are driven out of business and an equal number of buyers and sellers facing.
A permanent excess demand can thus occur only if the price can not fall in the
market because he can not sink. This is always the case when the authorities fix
ed a minimum price that is above the market price. Most of the increase is justi
fied by the specific
Intervening in the price
In some submarkets, however, we can observe a permanent imbalance. These are sit
uations where it is, either a continuous supply surplus, more supply than demand
, or a permanent excess demand, ie buyers are more than providers. Typical examp
les of the first case, the so-called butter mountains and milk lakes, typical ex
amples of the latter scenario are queues outside shops.
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Ensuring the background of the current banking crisis, the population a secure m
inimum income. This government intervention in the pricing system, however, the
preferences of the buyer and seller are not substantially altered. Instead, cert
ain incentives contribute to the sellers and buyers, leading to the formation of
the butter mountains and milk lakes. On the one hand because of the artificial
stream center high price of additional suppliers to the market and that those en
trepreneurs who lower the market price could not produce profitably. The amount
produced increases. At the same time, however, some consumers, ie Demand by the
high prices pushed the market because they increase the price the estate can no
longer afford or want. The result is a permanent excess supply because the price
reductions dynamics of the pricing process has been eliminated by law. Another
typical example of this type of market intervention are required by law or by co
llective bargaining binding minimum wages. However, when the prices set by the g
overnment below the market price, resulting queues. Because rising prices are no
t allowed to€are on time more buyers to this particular market as a supplier. Fo
r those buyers with the blue arrow marked, which were not without legal interven
tion, the product at market price to make it, ask for the artificially lowered p
rice attracted, well, too. On the supply side, however, disappear with a red arr
ow
Demand - quantity buyers market volume market price
Price
Permanent Artificial supply surplus demand reduction
Offer - Seller State Reserve artificial expansion of the supply
Queues
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The backgrounds of the current banking crisis marked by the provider market, sin
ce at the prescribed maximum rate can no longer produce profitably. Classic exam
ples of "queues" of the traffic jam on the highway, Mietobergrenzen, credit crun
ch. and to return to our subject, the so-called liquidity shortages or before we
can understand the current liquidity problems in their entirety, are two interm
ediate steps needed. First, we should lose some words about it to which part of
the market is it anyway, if we liquidity problem
Price range - Seller
The capital market - market for savings
, Turn
because
the
Term
the
"Liquidity" is rather misleading. Actually, we are namely the market for savings
, the so-called capital market. The providers in this market are the savers, so
all those one or two euros to the savings account
State maximum market price reduction d. Artificial Artificial bid to increase de
mand Permanent excess demand demand - buyers market quantity quantity
want to invest or put in stocks. The entrepreneurs are the demand side. You can
search for commonly called capital, "interest". He took her to the investment pr
ojects financed. And the price to compensate for the capital market, ensure that
its savers abandoned for a time on consumption and save instead. Thus determine
s the propensity of the population essentially the level of interest and the fut
ure material prosperity of a society. The higher the propensity to save, the low
er the interest rate and the higher the future prosperity. The lower the
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The backgrounds of the current banking crisis propensity, the higher the interes
t rate and the lower the level of future consumption. The law of supply and dema
nd, we have experienced in our discussions of the price system works, and of cou
rse on the capital market. The higher the supply of savings, the lower the price
, the interest rate. The last step on our way to solving the technical resources
of credit is based on real savings or other words to non-consumed production an
d creates lasting prosperity. The certificate issued by the central bank savings
, by contrast, created out of nothing. This note values is thus based on no chan
ge in the propensity to save and thus no increase in supply. The signal effect o
f artificial reduction to the buyers and sellers of savings is identical with th
e consequences of fixing a maximum price below the market price. The Setting of
the interest rate by the central bank that is done indirectly by the central ban
k artificially with the help of commercial banks extending the credit offer. Min
d you - this distinction is important-it will be in this artificial extension of
the loan offer made no additional savings, but only apparent savings. For bette
r distinction we want to use those terms, the Austrian economist of the number o
f customers is increasing, because the entrepreneur can borrow at lower rates. P
roviders i.e., signals to savers, which artificially lowered interest rate, howe
ver, that not more of saving, in the truest sense of the word pays off. A perman
ent excess demand is created, which, however, by the creation of fictitious valu
es - at least for a period of time - not noticeable in a queue. Liquidity puzzle
is certainly the most complicated. For the price fixing in the capital market i
s slightly different than on all other markets, so we in the capital market afte
r the price fixing can first observe no queue. Ludwig von Mises introduced: the
uncovered apparent savings he described as circulation credit, while he used for
the savings covered the concept of material resources credit.
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The backgrounds of the current banking crisis
Eventually, however, realize the entrepreneurs that they finish with the apparen
t values obtained their businesses can not, they could begin only in the belief
that the apparent values actually real terms, ie covered correspond to savings.
As a direct consequence of the increasing scarcity of material resources the ent
repreneurs interest loans start to push up in order to qualify to become a scarc
e good "savings" approach. And those companies with the interest float in the ai
r, their businesses would be even at the higher rate still profitable. This rise
in interest rates result, however, that those entrepreneurs who could operate t
o artificially lowered interest rates just yet profitable, be driven out of busi
ness and go bankrupt because the. This clarification is necessary, issuance of u
nsecured
The first harbinger of the inevitable recession heralds the liquidity crisis, th
e adjustment of interest rates to the actual interest rates. In addition to capi
tal-intensive manufacturing sectors, which benefited especially from the artific
ially lowered interest rates, liquidity crisis, the bank meets above average. Fo
r these now produce most of the unsecured note issued savings and in series in c
irculation unsecured loans for projects that would never expect a higher interes
t rate. The resulting time-lag and only noticeable making higher failure rate of
loan repayments, the banks bring to waver and punishes them for their bad busin
ess practices in the past.
Circulation credit these entrepreneurs had only ever tempted to launch in and of
itself unprofitable ventures. The increase in interest rates and the resulting
recession as a cure period of economic slowdown so that only those distortions w
hich had caused the issue of unmet credit circulation in the first place, becaus
e the entrepreneurs have been deceived on a broad front.
The liquidity glut
With the final collapse of the gold standard in the early 1970s, the production
unsecured note values that are playing down in economic jargon "Liquidity called
, were opened in all parts of the world's door. With the provision of more and m
ore liquidity financed the
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The backgrounds of the current banking crisis is always short-term operating pol
icies vary their seductive painful, but there is this recessive healing process
no reasonable alternative. The disaster was finally done already. If, however, m
any politicians, academics and other officials in leadership positions now by th
e central banks' provision of additional liquidity demanding "to prevent a" cred
it crunch ", they aggravate the situation with these demands even more. The lack
of supply is perpetuated and aggravated and deepened but merely the inevitable
adjustment to the preferences of the people. If this analysis was valuable for y
ou, please support the work of the Institute for Values economy with a free dona
tion to the account of the Institute in Erste Bank, Austria Account number: 2882
4799900, Bank Code: 20111 How could we explain in this analysis, the the be fill
ed liquidity crisis underlying structural supply gap but only by an increase of
interest, never by a further lowering of the interest rate. This increase is cer
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welfare-state promises to pay for the most part with uncovered blank checks. Aft
er the burst of the so-called "dot-com bubble in spring 2001 when the then chair
man of the Federal Reserve FED (Federal Reserve System"), Alan Greenspan, lowere
d interest rates again strong to prevent a deep recession. The inevitable recess
ion has he, like his peers in Europe, but it merely postponed and not canceled.
After seven more years of inflation of which by the exploding national debt will
also boost the inflationary danger of collapsing house of cards is now final. A
nd there are many indications that the policy will seek to either side of the At
lantic again, the devil - to expel the artificial interest rate cut - by Beelzeb
ub - one simply re-rate cut -.
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20/23
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