1. Mastering Global Financial Crises: a German Perspective
- Author:
- Jörg Asmussen
- Publication Date:
- 07-2009
- Content Type:
- Journal Article
- Journal:
- The Washington Quarterly
- Institution:
- Center for Strategic and International Studies
- Abstract:
- The world economy has experienced a downturn of historical dimensions since the onset of 2009. Almost everywhere, production has declined rapidly, world trade has virtually collapsed, and the recession has spread to all major economic regions. The global financial crisis is the culmination of an exceptional boom in credit growth and leverage in the financial system. Low interest rates, abundant liquidity, and low volatility prompted investors to search for higher yields without an adequate appreciation of related risks. Financial institutions developed new structures and innovative risky instruments to meet investors' demand for higher yields. Investors in turn, overly optimistic about continued rises in asset prices, did not look closely enough into the nature of the assets they bought. They mostly relied on the analysis of credit rating agencies which were, in some cases, also selling advice on how to develop the rated products. This failure of market discipline played a considerable role in the crisis.
- Topic:
- Financial Crisis
- Political Geography:
- Germany