IDENTIFYING THE ESSENTIAL FACTORS OF GLOBAL CRISIS – CONDITION FOR UNDERTAKING ADEQUATE MEASURES FOR OVERCOMING THE CRISIS

Journal Title: Acta Economica - Year 2010, Vol 8, Issue 12

Abstract

Current global economic crisis is neither conjuncture nor a cyclic one, but rather a serious systemic crisis, which roots lay in the Breton-Woods (1944) decision to let the American currency – US dollar become world’s reserve currency, and to let Fed guarantee the full convertibility of the US dollar into gold. The USA, however, could not resist the temptation to abuse the chance they were given, and they started paying for imported goods in dollars without adequate cover (in gold). Finally (in 1971) USA unilaterally gave up on the undertaken obligation and quitted the convertibility standard. In that way we reached a situation, in which USA supposedly managed to find the magic formula, which alchemist were seeking for centuries – to create gold out of nothing. Americans were now able (with help of their political, military and economic power) to acquire huge material goods from all over the world by mere dollar-printing. In order to satisfy growing ambitions, USA undertook measures to widen the area where US dollar is used, either by: 1) New territories, or 2) New methods of commerce. Later, thanks to the globalization, the US dollar became present in the whole world, and taking into account that the aggregate amount of material goods is limited, the new period emerges where new "virtual" instruments are made, which are being traded on financial markets. Through speculative operations (virtually out of a mere air) a big bubble has been inflated over time, or to put in other words a huge mass of financial assets has been created which has a manifold higher valuation than the actual value of the real sector economy. When the bubble burst we faced the current crisis, from which now we seek the exit. Measures undertaken by world leading economies and the USA in first place (flooding the markets with money and lowering the interest rates) seem like extinguishing fire with petrol. It is hard to believe that the very same measures which cause the problem could also solve it. Causes of current global crisis are more deep-rooted and reach deeply into morality and spirituality, so it is not sufficient to look for the exit from the crisis solely in economy.

Authors and Affiliations

Јован Б. Душанић, PhD

Keywords

Related Articles

STATE AND PERSPECTIVES OF THE CORPORATE BOND MARKET IN THE REPUBLIC OF SRPSKA

From a small number of corporate bonds issued since the founding of the Banja Luka Stock Exchange to date, it is obvious that the domestic corporate bond market is in the initial stage of its development. The subject of...

Schumpeterian growth theory: Entrepreneurship – a response to the economic downturn

Ignorance and misunderstanding of Schumpeter’s writing are the main reasons why the Anglo-American School, as dominant in the context of neoclassical economics, was and still is separate from the German Historical School...

Key questions in making decision about the cash management centralization in multinational company

When management of a multinational company considers the making decision about the cash management centralisation it has to answer to some key questions such as is there justified reason for cash management centralisatio...

ECONOMIC CRISIS AND CRISIS OF POLITICAL PARADIGM

In this paper we consider modern economy crisis regarding conflict of two matrix: economic-political organizing of society which marked modern western civilization, or in other words collectivism model and its planned ec...

NON - GONVERNMENTAL SECTOR - ITS ROLE IN ACHIEVING THE ENTIRE DEVELOPMENT OF THE SOCIETY AND OVERCOMING OF THE CURRENT FINANCIAL AND ECONOMICAL DEPRESSION

Although some voluntary organizations and associations of citizens emerged during the whole historical development of human society, the notion non-governmental organization (NGO) started to be used and to play an import...

Download PDF file
  • EP ID EP43686
  • DOI -
  • Views 248
  • Downloads 0

How To Cite

Јован Б. Душанић, PhD (2010). IDENTIFYING THE ESSENTIAL FACTORS OF GLOBAL CRISIS – CONDITION FOR UNDERTAKING ADEQUATE MEASURES FOR OVERCOMING THE CRISIS. Acta Economica, 8(12), -. https://europub.co.uk/articles/-A-43686