Based on the recent subprime crisis, the authors analyze the mechanisms of a financial market crisis. In order to highlight the basic transmission mechanisms and drivers of a financial market crisis they discuss the relevant players & strategies, explain the principles of the financial instruments that were involved in the crisis and analyze how bubbles emerge, how they burst and what the economic impact might be. The authors address the following key questions: * Why do financial markets run into crises over and over again? * Where do risks for financial crises come from? * Who are the players in the game? * Which instruments and strategies can drive a crisis? * What are the transmission mechanisms onto other markets and the real economy? * When is it all finally over? * How to best weather the storm? Hence, in the prologue the authors highlight the basic framework for a financial crisis based on the subprime crisis. Here, they will also introduce the important topics and drivers of the crisis, i.e. the relevant players (banks, investment banks, hedge funds, real money investors, regulators and rating agencies), the involved instruments (ABS/RMBS, CDOs, SIV, leveraged loans, Leveraged Super Senior tranches, etc.), the strategies which caused the crisis or were affected by the meltdown (leveraged exposure to highly correlated risks), and risks that were underestimated (investors ignored the market risk that was involved with the leveraged bets). In the subsequent chapter -- which is split into three parts -- they will explain these important topics in more detail and highlight the infection and transmission mechanisms. As an example, they introduce the business and investment concepts of investment banks and hedge funds and how they were involved in the crisis. Moreover, they explain how structured credit products (such as ABS, CDOs and SIVs) work and how they were used in order to implement leveraged bets in the markets. Finally, they highlight how a financial crisis evolves and why certain financial institutions failed. In the epilogue, they conclude how markets manage a crisis and why the crisis may also be healthy for the stability of financial markets.

While paramount to the modern economy, understanding how the banking system works has been usually cast aside from overall economic education. Even in the aftermath of the recent financial crisis, which has underlined the vital importance of banking in the economy, the workings of the sector remain a black box. To this end, this book provides a comprehensive and easy to read review of the banking sector, covering all issues related to commercial and investment banking and providing experienced as well as non-expert readers the opportunity to expand their knowledge on these topics. After going through the book, readers have the opportunity to gain a deeper knowledge regarding the commercial and investment functions of the banking sector and the ability to evaluate the potential outcome of policy actions.

In this volume, Louis-Philippe Rochon and Hassan Bougrine bring together key post-Keynesian voices in an effort to push the boundaries of our understanding of banks, central banking, monetary policy and endogenous money. Issues such as interest rates, income distribution, stagnation and crises – both theoretical and empirical – are woven together and analysed by the many contributors to shed new light on them. The result is an alternative analysis of contemporary monetary economies, and the policies that are so needed to address the problems of today.

In a series of disarmingly simple arguments financial market analyst George Cooper challenges the core principles of today's economic orthodoxy and explains how we have created an economy that is inherently unstable and crisis prone. With great skill, he examines the very foundations of today's economic philosophy and adds a compelling analysis of the forces behind economic crisis. His goal is nothing less than preventing the seemingly endless procession of damaging boom-bust cycles, unsustainable economic bubbles, crippling credit crunches, and debilitating inflation. His direct, conscientious, and honest approach will captivate any reader and is an invaluable aid in understanding today's economy.

This book presents the first Editorial under the title 'From 1870 - Until Now' as well as the aftermath of the 2007 - 2008 Credit Crisis, up to halfway 2020, to help understand what is going on in the world. The financial crisis that became manifest in 2007 and deepened further in 2008 was totally wrongly treated by the ruling politicians at the time and was not resolved professionally. The muddy misery in the years 2010, 2011 and 2012 was closely followed at the time and the essence of it was then published every quarter. Along with many educational Facts and interesting Tips for everyone. Various main issues have been explained in Editorials. The misery continues as long as politicians do not implement the measures that are absolutely necessary. Read this book, learn what you need to know to sustain yourself in this world. Try to always do that in order to live successfully and happily. APPENDIX to this book: Chronicle Credit Crisis The chronicle begins on January 17, 2007 and presents what was in the news then about the developments in the financial world, with here and there the vision of author Jan Jacobs. Remediation, see Business Economics how to solve a credit crisis, explained on p.p. 44-46. In 2008, they should have closed the financial system casino instead of renovating it. The world is in need of a new financial system, what is explained throughout this book. My opinion, concluded at the end, and finally you can form your own judgement. Where are we now, in 2020? When dictator Erdogan intervened with the Turkish Central Bank, the Turkish economy collapsed. Donald Trump, USA President, did the same like Erdogan. March 3, under harsh pressure from Trump, FED rate fell half a percent from 1.75 % to 1.25 %. The idea was to get stock prices to rise due to the fall in interest rates, but the reasoning of serious investors was away by this. In a few days, the Dow Jones Index dropped to 21,297.88 on March 12. Trump had learned nothing from it, it got even worse, on Sunday March 15, FED interest rate went to almost zero in one fell swoop. On March 16, 2020, Stock Exchanges plunged down completely worldwide. Corona Crisis, Covid-19 is not Ebola, we have to make that distinction. A flu virus, an accident at home or in traffic, these are all only minimal risks. Fear became the guiding principle; intellect of government sank further away, fortunately not everywhere. Many people panicked, and governments got stressed. The old respect for the truth no longer applies above all, even for far too many scientists. Fake news, Twitter nonsense, it goes on. Literal quotation from p. 26 in the book: "The media nowadays barely have quality, it's almost all about ratings. Politicians, they mostly do not try to pursue ideals to the people anymore." Manifest already in 2009. Politicians pass laws and promise the people a lot, but without proper financing, it doesn't mean anything. All states, companies and individuals need to exercise self-control in spending, as revenues can drop suddenly in the event of unexpected calamity (so-called Cassandra, prepare for any natural or unnatural disaster) and also in anticipated long-term additional spending. Former inhabitants of a country were the owners of the capital in that country and both import and export of capital were marginal. Meanwhile it is no longer clear who owns what exactly, nor where the owners are located; homeownership is traceable as is the ownership of some other things but more and more capital gets out of sight.

The most recent credit crisis brought to light many problems with our financial system. This book offers plain-spoken explanations of what went wrong during the past crises and explains how to prevent future problems.

Provides a comprehensive overview of a broad range of uses of the flow of funds within the central bank community as well as in the academic field, prepared by international experts in the field. Based on the crisis experience, it offers an overview of lessons for macrofinancial analysis and financial stability.

The experiences of seven countries that have undergone banking crises show that crises have significant implications for the short-run stability of the demand for money, the money multiplier, the transmission mechanism, and the signal variables of monetary policy. Monetary and credit instability, coupled with changes in the nature of the monetary and credit aggregates, complicate monetary management. These findings may require redesigning monetary instruments in favor of faster-reacting instruments, such as open market operations, and introducing additional indicators of the monetary stance, such as asset price and exchange rate movements. More frequent reviews of monetary programs may also be necessary.

Nowadays remembered mostly through Adam Smith’s references to the short-lived Ayr Bank in the Wealth of Nations, the 1772-3 financial crisis was an important historical episode in its own right, taking place during a pivotal period in the development of financial capitalism and coinciding with the start of the traditional industrialisation narrative. It was also one of the earliest purely financial crises occurring in peacetime, and its progress showed an impressive geographical reach, involving England, Scotland, the Netherlands and the North American colonies. This book uses a variety of previously unpublished archival sources to question the bubble narrative usually associated with this crisis, and to identify the mechanisms of financial contagion that allowed the failure of a small private bank in London to cause rapid and severe distress throughout the 18th century financial system. It re-examines the short and turbulent career of the Ayr Bank, and concludes that its failure was the result of cavalier liability management akin to that of Northern Rock in 2007, rather than the poor asset quality alleged in existing literature. It furthermore argues that the Bank of England’s prompt efforts to contain the crisis are evidence of a Lender of Last Resort in action, some thirty years before the classical formulation of the concept by Henry Thornton.

Uncertainty about the riskiness of new financial products was an important factor behind the U.S. credit crisis. We show that a boom-bust cycle in debt, asset prices and consumption characterizes the equilibrium dynamics of a model with a collateral constraint in which agents learn "by observation" the true riskiness of a new financial environment. Early realizations of states with high ability to leverage assets into debt turn agents optimistic about the persistence of a high-leverage regime. The model accounts for 69 percent of the household debt buildup and 53 percent of the rise in housing prices during 1997-2006, predicting a collapse in 2007.