This article gathers all economic and financial crises since the 1980s.
Judging from the evolution of the time context, the previous crises since the 1980s are not independent. The basic logic is that the collapse of the Blintton Woods system has kicked off the frequent stages of previous economic and financial crises to a certain extent, and geopolitical games have provided external support conditions for the outbreak of previous economic and financial crises to a certain extent.
1. 1970s and 1980s: Bretton Woods system collapse, the formation of Jamaica system, the formation of oil crisis and international conflicts
(I) Bretton Woods system collapse and the formation of Jamaica system: kicked off the previous economic and financial crises
To a certain extent, the collapse of the Bretton Woods system and the formation of the Jamaica system kicked off the outbreak of previous economic and financial crises to a certain extent.
. In July 1944, in order to resolve the chaos of the international order during the Great Depression, representatives of 44 countries held a United Nations monetary and financial conference at the Mount Washington Hotel in Bretton Woods, New Hampshire, USA to establish standards for international currency and financial transactions and discuss post-war reconstruction issues. The meeting passed two annexes: The Final Resolution of the United Nations Monetary and Financial Agreement, the International Monetary Fund Agreement and the International Bank for Reconstruction and Development Agreement, and determined the fixed exchange rate between gold and the US dollar (35 US dollars to one ounce of gold), and stipulated that currencies of various countries are not allowed to depreciate at will to maintain a fixed exchange rate, and established two major institutions, IMF and World Bank , namely Bretton Woods System.
. As the economy of non-US economies gradually recovers, the fixed exchange rate system is increasingly unable to meet their needs, so most economies choose to exchange for more value-preserving gold, which leads to the US dollar falling into crisis many times. In February 1971, US President Nixon issued a decree announcing that the United States refused to sell gold to foreign central banks. In August 1971, the United States unilaterally withdrew from the " Bretton Woods Agreement ". In February 1973, major economies in the world were hit by speculators and began to implement the floating exchange rate system . The Bretton Woods system officially collapsed, but the two major institutions, the IMF and the World Bank, have been retained to this day.
. In January 1976, the IMF Interim Committee on International Monetary System held a meeting in Jamaica and reached the "Jamaica Agreement", which brought international monetary system from the Bretton Woods era to the Jamaica era, namely gold demonstration, floating exchange rate legal, international reserve assets diversification, etc.
Although the Jamaican system has solved the so-called Triffen problem to a certain extent (the contradiction between the gradual increase in the US dollar held by non-US economies as a single international currency and the gradual decline in confidence in the US dollar), due to the lack of unified international monetary standards and the general adoption of floating exchange rate systems in various economies, the unstable factors and forces in the international financial system of have increased significantly, and frequent fluctuations in global financial markets, disturbing the global economy and even stimulating the economic and financial crisis has almost become the norm. So we see that since the formation of the Jamaican system, the frequency of economic and financial crises has increased significantly, such as the Latin American debt crisis in 1982, the Japanese economic collapse in 1990, the British pound crisis in 1992, the Mexico debt crisis in 1994, the Southeast Asian financial crisis in 1998, the Russian debt crisis in 1998, and the Argentina debt crisis in 2001, etc.
(II) The third oil crisis: the origin of geopolitical power of the outbreak of previous economic and financial crises
If the collapse of the Bretton Woods system and the formation of the Jamaican system are the internal decisive forces of the outbreak of previous economic and financial crises, then the two oil crises constitute the origin of geopolitical power of the outbreak of previous economic and financial crises to a certain extent. Since then, the outbreak of all economic and financial crises has almost all contributed to the fuel.
A total of three oil crises occurred after the collapse of the Bretton Woods system, namely, the first oil crisis that broke out in 1973 due to the oil embargo of Arab oil exporting countries on countries supporting Israeli-related countries, the second oil crisis that broke out in 1979-1980 due to the Islamic Revolution in Iran and the Iran-Iraq War in August 1990 (lasting until 1991). These three oil crises have significantly pushed up the prices of oil and other energy sources to some extent, causing a sharp rise in global inflation pressure, exacerbating the conflicts between economies and the dilemma of some economies.
(III) International conflicts and frequent local wars: laying the root of disaster for subsequent geopolitical games
The 1970s and 1980s were also a period of constant international conflicts and frequent local wars. The various international conflicts and local wars that occurred during this period also laid the root of disaster for subsequent geopolitical games and disturbed the world.
These international conflicts and local wars include but are not limited to the Vietnam War that broke out between 1964 and 75, the Soviet invasion of Afghanistan from 1979 to 89, the Iran-Iraq War that broke out from September 1980 to March 1984, the Sudanese Civil War that broke out from May 1983, and the United States raided Libya from March to April 1986, etc. The above conflicts have led to the intensification of global geopolitical games, and local wars have occurred frequently, such as the Gulf War that broke out between August 1990 and February 1991, the Russian-Chchen War in August 1999, the United States invaded Afghanistan in 2001, the United States invaded Iraq in March 2003, the Russian-Georgia War in August 2008, the Syrian Civil War in January 2011, the Yemen Civil War in 2015, the Armenian-Azerbaijan conflict in September 2020, and the Russian-Ukraine conflict we are currently experiencing, etc.
2. 1980s: Two oil crises and Feder Monetary policy cycle drives the outbreak of the sovereign debt crisis in Latin America
(I) Latin American Debt Crisis) is an sovereign debt crisis in Latin American countries in the 1980s. It was caused by the low interest rate monetary policies implemented by economies such as the United States caused Latin American countries such as Mexico, Argentina, Brazil and Peru to borrow a large amount of debt to develop their economies. These sovereign debts became unsustainable due to the sharp and rapid increase in interest rates in the United States during the second oil crisis. In the end, most Latin American countries experienced a sovereign debt crisis against the backdrop of capital outflows, depreciation of local currency, and a sharp rise in debt pressure.
(II) In August 1982, the Mexican government announced that it was unable to repay US$80 billion in foreign debt on schedule due to exhaustion of reserves, which officially kicked off the debt problems of developing countries. Before that, economies such as Jamaica, Peru, Poland, and Turkey were actually in trouble.
Referring to the above-mentioned analysis of causes, before the outbreak of the sovereign debt crisis in Latin America, most Latin American countries with low savings rates had to choose to promote their economic development by borrowing foreign debts. The low interest rate policies implemented by the United States during the two oil crises also fueled the motivation for Latin American countries to borrow debts. In this way, the economy of Latin American countries has indeed achieved good growth levels, such as Mexico's economic growth rates from 1978 to 1981 reached 8.20%, 9.20%, 8.30% and 8.10% respectively.
(III) The Federal Reserve's consecutive sharp rate hikes in 1979-1982 pierced the debt bubble of Latin American countries, and problems such as depreciation of the local currency, capital outflows, and the continuous expansion of the current account deficit. However, from the timeline, the outbreak of the sovereign debt crisis in Latin America lasted for seven years to 1989, with a total of 16 Latin American countries declaring defaults, involving as much as US$200 billion.
Although some debt exemptions and new debt replacements were finally resolved in the Latin American debt crisis, Latin American countries have been trapped in the solution of their own debt problems for decades before 1989 and cannot take into account other things. Therefore, the decade before 1989 was also called the Latin American country " lost ten years ".
(IV) The outbreak of the sovereign debt crisis in Latin America reveals the various difficulties in Latin American countries in developing their economy to a certain extent, and its fragility has become more prominent. As the main parties to the sovereign debt crisis in Latin America, Mexico and Argentina also broke out again in 1994 and 2001, respectively, and only five years later the end of the sovereign debt crisis in Latin America. This means that the solution to the Latin American sovereign debt crisis is not fundamental and has not fundamentally changed the dependence of Latin American countries on foreign debt.
3. The 1980s and 1990s: attempts to block Japan's monetary system with the European
(I) Japan: The square agreement was signed in 1985, and the bubble burst in 1990. It has fallen into the lost 20 years. After the war, Japan's economy developed rapidly with the support of the Korean War and the large amount of funds and technologies of the United States. Since 1955, the economy has maintained rapid growth. In 1972, the total economic output surpassed Germany and jumped to the second place in the world. However, under the impact of the two oil crises, the US economy fell into a downturn, resulting in intensification of economic and trade frictions between Japan and the United States.
. In 1985, the United States, Britain, France, Germany and Japan signed the "Place Agreement" to promote the significant appreciation of the yen and implement economic liberalization policies. After the signing of the agreement, the dollar-JPY exchange rate rose from a high of 263 to around 120 in 1988 (the appreciation rate was as high as that). At the same time, during the period from 1980 to 1987, the Bank of Japan also adopted an extremely loose monetary policy, and the discount rate dropped from above 9% to a low of around 2.50%.
Driven by economic liberalization policies, the low interest rate and relatively loose monetary environment and the strong yen have caused a large amount of funds to flow into Japan's stock market and real estate market, and liquidity has spread, driving the continuous rise of Japan's stock market and real estate market. At the same time, a large amount of Japanese funds used the above policies to acquire assets in Europe, the United States and other places, becoming a bright landscape at that time. For example, Sony acquired Hollywood Columbia for US$3.4 billion, Panasonic acquired Universal Film Company for US$61, and Mitsubishi Heavy Industries acquired 51% of the shares of New York Rockefeller Center for US$850 million.
. The continued rise in the property market and the appreciation of the yen have exacerbated the housing difficulties of low-income groups in Japan and also caused serious blows to export companies. At the same time, a large amount of funds are specifically aimed at entering the real estate market and foreign exchange market to make profits, but no longer entering the production process, resulting in the typical binary differentiation of the Japanese economy, which is cold in the real economy and the stock market and the foreign exchange market are hot.
. In order to resolve the above crisis, the Japanese government has continuously raised interest rates sharply since May 1989, rapidly increasing the discount rate from 2.50% to 6% in August 1990, that is, the discount rate increased by 350BP in one year. This move has put low-cost funds that originally entered the stock market by adding leverage to face great pressure, and the capital market has fluctuated significantly. The Nikkei 225 index fell from a high of 39,000 points at the end of 1989 around 20,000 points in September 1990, and the decline in 1990 alone was close to 50%. Affected by this, a large number of financial institutions, enterprises and ordinary people suffered huge losses, which forced these people to repay huge debts by selling real estate and other means, and led to a large amount of funds withdrawing from Japan. Since 1991, the Japanese property market has also begun to collapse.
The collapse of the Japanese stock market and the real estate market and the withdrawal of foreign capital forced the Bank of Japan to restart the 10-year interest rate cut cycle in July 1991, lowering the discount rate from 6% to 0.10% in September 2001. However, during this period, although the Nikkei 225 index was repeatedly repeated, it continued to decline to 7,600 points in April 2003 from the trend.
. From the perspective of the total economic output, the Japanese economy has maintained rapid growth after the war. Before 1995, except for a slight contraction in 1989, it maintained positive growth in the rest of the time period. In 1995, Japan's total economic output reached 5.55 trillion US dollars, and then it shrank continuously to US$4.92 trillion, US$4.49 trillion and US$4.10 trillion in 1996-1998.However, the high of $5.55 trillion in 1995 was not re-realized until 2010. It took Japan 20 years from the bursting of the bubble in 1990 to the economic output returning to its 1995 high in 2010, which is also known as the 20 years that Japan lost.
(II) The British pound crisis in 1992: After joining only two years, the UK finally announced its withdrawal from the European monetary system
992's British pound crisis was an impact on the entire European monetary system, including the United Kingdom.
. In March 1979, eight member states of the European Economic Community (France, Germany, Italy, Belgium, Denmark, Ireland, Luxembourg and Netherlands ) jointly established the European Monetary System (EMS), clarifying the rules for the linkage exchange rate of each economy, that is, the currencies of EMS are staring at each other and jointly floating currencies outside the EMS. This means that the currencies of each economy are only allowed to float within a certain exchange rate range. Once the specified exchange rate floating range is exceeded, the central banks of each member state must intervene to get them back to the above floating range.
. The British economy, which has experienced many years of rapid growth, suddenly fell silent during 1990-1992 and fell into trouble. Its actual economic growth rates in these three years were only 0.60%, -1.70% and 0.00% respectively. In order to solve its own difficulties and avoid the impact of interest rate cuts on the pound, the UK announced its joining EMS on October 5, 1990, and the East-West and Germany merged during the same period.
While joining EMS, the UK announced that the exchange rate fluctuation range of the British pound against mark is 2.7780-3.1320, with a fluctuation range of around 6%, and a central exchange rate of 2.95.
. After the merger, Germany, under the background of supporting East Germany's construction through a large amount of funds, had to raise interest rates to cope with the hot economic fundamentals and inflation showing an upward momentum. At the same time, the spread between economies within EMS and the weak economic fundamentals of the UK have caused greater depreciation pressure on the pound.
. From December 9 to 10, 1991, 12 European Community countries signed the " Maastricht Treaty (also known as the " European Union Treaty "), and decided to build an economic and monetary alliance in three stages. It was proposed that if more than 7 member states that met the "convergence standard" before January 1, 1999, the implementation of a single currency can be started. This move has made international financial speculators realize that some overvalued currencies in EMS (such as the British pound and Italian lira) will face corresponding depreciation pressure, and it will be difficult for them to be consistent with the strong countries in the EMS system (such as Germany) in terms of economic policies and exchange rate maintenance.
After joining EMS, the UK was in a cycle of interest rate cuts, and its benchmark interest rate dropped from 14.88% in August 1990 to 5.88% at the end of 1993, which was exactly the depreciation of the pound.
, on July 16, 1992, Germany raised the discount rate to 8.75%, on September 8, 1992, the Finnish government announced that the Finnish Mark would be separated from the German Mark, and on September 11, 1992, the German Bank's president publicly announced that Germany would not cut interest rates, and other events caused international financial speculators represented by Soros to start attacking weaker currencies in the EMS system such as the British Pound and Italian Lira without fear, resulting in the continued decline in the exchange rate ratio of the British Pound and Lira against Mark. The pound against Mark fell from 2.95 to below 2.80. After multiple rounds of competition between the two sides, the UK finally had to announce its withdrawal from EMS on September 16, 1992, after the pound against Mark price ratio fell below the lower limit. In this crisis, international speculators represented by Soros achieved the final victory.
4. Late 20th century: Asian financial crisis from 1997 to 1998
(I) Most Southeast Asian countries were forced to give up the fixed exchange rate system
At that time, Southeast Asian countries at that time were not sufficient for foreign exchange reserves, their own problems gradually accumulated and even began to be exposed, their economic fundamentals were relatively fragile, and the fixed exchange rate system was still implemented, which gave Soros and other international speculators a chance to take advantage of it, and began to bet that countries would give up the fixed exchange rate system.
Under the blockade of international financial speculators, currencies such as Thai baht, Philippine peso , Indonesian rupiah , Malaysian ringgit, Korean won, Singapore dollar have successively become targets of attack, and Southeast Asian currencies have almost all been lost. In the end, economies such as Thailand, Philippines , Indonesian and Malaysian have successively announced their abandonment of the fixed exchange rate system. At the same time, Brazil and Russia also experienced a currency crisis.
(II) During the Asian financial crisis, brief description of the process of defending the Hong Kong-related exchange rate system
Although mainland China, which implements capital controls, was not affected much during the Asian financial crisis from 1997 to 1998, it was inevitable that Hong Kong, which implements the linked exchange rate system, and launched a competition with international speculators to defend the Hong Kong-related exchange rate system.
. Since July 1997, international speculators have launched several three-dimensional attacks on the Hong Kong dollar.
(1) In October 1997, international speculators began their first large-scale attack, that is, they first sold a large amount of Hong Kong dollars in the currency market, causing the Hong Kong dollar exchange rate to fall. The HKMA In order to increase the cost of borrowing Hong Kong dollars by international speculators and significantly increase interest rates, the interbank overnight lending interest rate soared to 300%. In that month, the Hong Kong stock market in China fell sharply from nearly 12,000 points to 9,000 points.
(2) Entering 1998, international speculators continued to attack the Hong Kong dollar, and the Hong Kong dollar suffered obvious selling pressure. In particular, on January 21, 1998, the largest investment bank in Hong Kong, Baifuqin, broke out a scandal, exacerbating the exposure of Hong Kong's own problems. In June and August 1998, international speculators launched another attack on the Hong Kong dollar, and the Hang Seng Index fell to more than 6,600 points.
. In August 1998, when the Hang Seng Index fell to more than 6,000 points, the Hong Kong Monetary Authority began to use foreign exchange fund to enter the stock market and futures market to absorb the Hong Kong dollar sold by international speculators and stabilize the foreign exchange market at the level of 7.75. The specific process is:
(1) Purchase 33 constituent stocks in the Hang Seng Index to drive the index to rise;
(2) Accept the selling orders of international speculators in the forward foreign exchange market;
(3) Require all securities firms not to lend stocks from international speculators, and at the same time, the regulatory authorities substitute the stocks from custodial banks and trust institutions to cut off the source of speculators' "ammunition";
(4) launched an attack on the stock index futures market, pushing up the August futures index and forcing speculators to close their positions (many hedge funds are eager to cash out from the Hong Kong market due to the ruble), and at the same time lowering the September futures index, making it more expensive for speculators to turn into ;
(5) continue to use the practice of pushing up interest rates to increase speculators' costs.
. On August 28, 1998, the Hong Kong government ushered in a decisive battle with international speculators. The Hong Kong government resolutely bought stocks and international speculators sold them. The stock market trading volume exceeded HK$79 billion on that day, which was 270% higher than the historical high of trading volume. The Hang Seng Index finally stood firm at 7829 points. From August 7, 1997 to August 13, 1998, the Hang Seng Index fell sharply from 16,820.31 points to 6544.79 points, and its market value shrank by 61%. From August 14 to August 28, 1998, it took half a month for the Hong Kong government to spend 100 billion Hong Kong dollars and eventually won the battle to defend the Hong Kong dollar, but it also paid a heavy price.
. On September 7, 1998, the Hong Kong Monetary Authority issued new regulations on foreign exchange, securities trading and settlement, which greatly restricted speculation among speculators. On that day, the Hang Seng Index soared by 588 points, reaching the 8,000 point mark. The losses of international speculators further intensified, and they eventually had to retreat from Hong Kong.
In the entire action to defend the Hong Kong-linked exchange rate system, the Hong Kong government used a total of approximately HK$118 billion in foreign exchange funds.
5. Early 21st century: The US subprime mortgage crisis and the global financial crisis from 2007 to 2008
Lehman incident itself was caused by the US subprime mortgage crisis that broke out in early 2007, and on this basis it evolved into a global financial crisis. Therefore, the subprime mortgage crisis, Lehman bankruptcy and financial institutions are not independent.
(I) June 2004-June 2006: The Federal Reserve has raised interest rates continuously, and the pressure on the US property market has highlighted
. Since 2001, affected by the impact of the Internet bubble , the Federal Reserve has entered a cycle of interest rate cuts (the target interest rate of the federal funds has dropped from 6.50% to 1% in 2003), and has driven the continuous decline in mortgage interest rates, stimulating the US property market and pushing the US housing prices to continue to rise, leading to the increasingly serious bubble in the US property market.
. The US real estate bubble has led to the rise of US inflation from 2003 to 2004. To this end, then-Federal Chairman Greenspan started the interest rate hike process in June 2004 during his last term, quickly increasing the target interest rate of the federal funds from 1% to 5.25% in June 2006 (5 interest rate hikes in 2004 to 2.25%, eight to 4.25% in 2005, and four to 5.25% in 2006).
. Affected by this, the interest rates of 30-year and 15-year mortgage loans in the United States also rose to 6.80% and 6.44% respectively, causing a huge impact on the property market. The default rate of housing mortgage loans began to rise significantly since then.
(II) From the end of 2006 to the end of 2007: The US real estate bubble burst, and the subprime mortgage crisis began to appear
When the Federal Reserve was nearing the end of the interest rate hike cycle in 2006, the US real estate bubble began to burst, the housing market declined, and the default rate of housing mortgage loans began to rise sharply from below 1.50% in 2006, rose to more than 3% at the end of 2007, rose to more than 6% at the end of 2008, and rose to around 10% at the end of 2009.
The bursting of the real estate bubble has led to a sharp increase in the risk of default for subprime lenders of housing mortgage loans, making it difficult for various financial tools created based on housing mortgage loans to cover up the risks in the form of passing flowers. In February 2007, HSBC Holdings added $1.8 billion in bad debt provisions for its subprime mortgage business in the United States, Countrywide Financial Corp, the largest subprime mortgage company in the United States, and New Century Financial, the second largest subprime mortgage loan in the United States, issued a profit warning, and other events that indicate that the risks of subprime mortgages in the United States began to appear.
(III) Starting from the end of 2007: The pressure on the global financial industry has risen sharply, and the global rescue has started to rescue the market
. The emergence of the US subprime mortgage crisis has caused the value of various securities created by US financial institutions based on housing mortgage loans to drop sharply, and caused investors holding these securities to suffer heavy losses. They have to make a large amount of impairment provisions for . The global financial industry's operating conditions have deteriorated one after another since 2007, and has exacerbated the turmoil in the global financial market.
. According to the data, although the housing mortgage loans of all commercial banks in the United States were only about $2 trillion during the subprime mortgage crisis, the total amount of housing mortgage loans borne by American families and non-profit organizations was as high as $10 trillion at the time. If the default rate of 6% in 2008 is based on the total delinquency rate, the total scale of the delinquent housing mortgage loans should be US$600 billion.
. At the same time, the above data also shows that most of the housing mortgage loans borne by American families and non-profit organizations are not issued by commercial banks, but by other institutions similar to shadow banking, which means that the risks implicitly contained in the US subprime mortgage crisis are actually much greater than what the data shows.
For this reason, central banks of major economies around the world began to rescue the market, and the Federal Reserve also began to continuously lower the benchmark interest rate in September 2007 and inject liquidity into the market many times.
(IV) Full year of 2008: The government and the market competed, and Lehman finally had no choice but to go bankrupt
. After the efforts of the global central bank in the second half of 2007, the global financial market experienced a short period of calm. Some institutions believed that the bottom had arrived, and even the Federal Reserve began to send out signals to end interest rate cuts. So some institutions began to buy at the so-called "market bottom". Lehman was one of them, and began to raise funds by issuing a large amount of securities to acquire assets in trouble (mainly residential and commercial real estate).
At that time, compared with residential real estate with rising default rates, the default rate of US commercial real estate has always remained at a low level, which was very attractive to a large number of investment banks, including Lehman.To this end, in the increasingly severe subprime mortgage crisis in the United States in 2007, Lehman raised funds to acquire properties nationwide in the United States in various ways, in order to package them into standardized securities and sell them to investors. For example, Lehman issued a $60 billion commercial real estate mortgage in 2007 and issued commercial real estate mortgage securities (CMBS) based on this, hoping to divest assets and release risks by selling CMBS to global investors.
. However, many institutions, including Lehman and the Federal Reserve obviously underestimated the impact of the US subprime mortgage crisis and the extent to which the property market is in trouble. Starting from the end of 2007, the global financial market began to fall into turmoil again, and the housing market crisis continued to stage and intensify. Lehman was unable to package all commercial real estate mortgage loans into CMBS for sale. The remaining commercial real estate mortgage loans and unsold CMBS are not allowed to hold on their own, that is, the risks of commercial real estate are borne by Lehman himself.
. In March 2008, Bear Stearns sought emergency financing from JP Morgan Chase and the New York Fed, further raising market concerns about the US banking industry. In April 2008, a series of events crushed the last life-saving straw for the US banking industry. Specifically, on April 8, the IMF said that the global loss due to the subprime mortgage crisis would reach US$1 trillion. On April 17, Merrill Lynch announced that its loss in the first quarter of that year reached US$1.96 billion and was a three-quarter loss. On April 18, Citigroup announced that it still had a net loss of US$5.11 billion after reducing losses of more than US$13 billion. On April 29, Deutsche Bank announced that it had a net loss for the first time since 2003.
. In the Lehman incident, the game between the government, Lehman and the market is undoubtedly the most representative. In fact, in the first quarter of 2008, when major banks around the world announced losses, Lehman announced on March 18, 2008 that its net profit in the first quarter of that year was expected to reach US$1.7 billion higher than market expectations, and announced a layoff plan for 5,300 people and completed a US$2 billion bank credit financing.
This means that at least in early 2008, Lehman's risk was not obvious. However, in the next few months, Lehman's operating conditions began to take a sharp turn:
(1) On April 1 and June 12, 2008, Lehman issued 4 million non-cumulative perpetual convertible preferred shares and issued additional shares of General Tong and preferred shares, raising US$4 billion and US$6 billion respectively.
(2) On April 10, 2008, Lehman announced that three of its investment funds would be liquidated. Since then, Lehman's stock price has begun a rapid downward path, from US$50 per share to US$0.079 in September 2008.
(3) On June 16 and September 10, 2008, Lehman announced his second and third quarter results in 2008, with losses in the quarter reaching US$2.8 billion and US$3.9 billion, respectively.
On September 10, 2008, Lehman's investment attraction negotiations with South Korea Development Bank broke down. On September 12, the US Treasury Department and the Federal Reserve held an emergency meeting in hopes to promote the conclusion of the Lehman sale transaction. On September 14, Lehman's efforts to sell his own business was finally declared a failure and filed for bankruptcy protection. On September 17, Lehman sold North American investment banking and capital market business to Barclays. Regarding Lehman's bankruptcy, the US government and Wall Street explained that taxpayers' money cannot be used to fill Lehman's holes. However, after Lehman officially went bankrupt, the US government and the Federal Reserve began to truly respond to the financial crisis by injecting liquidity into the market. The coincidence in time is beyond the reach of ease.
In fact, it is even more regrettable that from March to September 2008, when Lehman was in crisis, it was a period of sharp rise in nominal and real interest rates of US Treasury bonds, which made Lehman unable to smoothly raise foreign funds or dispose of assets during this period to alleviate the liquidity crisis he faced.
6. The era after the financial crisis in 2008: The European debt (European sovereign debt) crisis that began in 2009
(I) Main background: Instability within the EU system
The outbreak of the European debt crisis has both the sequelae of the 2008 financial crisis period, and to a certain extent reflects the instability inherent in the EU system.After World War II, European economies generally realized that they needed to actively promote the reconstruction of Europe through marriage and integration. The gradual increase in the differentiation between Germany and other economies and the strength of the German Mark also made the previously separated Europe through a unified economic and monetary alliance and other links to become an effective way for major European economies to solve their own problems. At that time, the geopolitical game between the two major economies of Germany and France finally made the above idea a reality and gradually implemented. Specifically, the Paris Treaty in 1951 established a coal-steel community, including Germany and France; the Rome Treaty in 1957 established an European Community; in March 1969, the EC Hague Conference proposed the idea of establishing a European Monetary Union; in March 1971, the "Werner Plan" advocated the establishment of the European Economic and Monetary Union in three stages within 10 years (stripped due to the oil crisis and financial storm); in March 1979, Germany and France promoted the establishment of the European monetary system, and the European monetary unit "Eu Gu" was born; in June 1989, the Delor Report advocated the establishment of the European Economic and Monetary Union in three stages.
However, due to the uneven development levels and economic scale of the various economies in the euro zone, the unified interest rate policy will prevent countries with lower economic development levels from sufficient investment support, resulting in the development level between economies being further widened. That is, economies with relatively poor economic development levels cannot attract corresponding capital inflows by raising interest rates, nor can they expand public investment through debt and other means to support their own economic development and absorb employment. At this time, the eurozone will have to transfusion blood to these countries, and taking on the transfusion task will naturally become the responsibility of economies such as Germany.
But Germany has no obligation or willing to use its own strength to save other economies. In order to avoid the impact of differences in economic development levels on the stability of the euro and to prevent Germany from always taking the responsibility of transfusions to other countries in the euro zone economy. Germany, which has the best economic development level, restricts the fiscal policy of countries with low-development levels in the euro zone through two of six convergence standards, namely, the fiscal deficit/GDP cannot exceed 3% and the cumulative public debt/GDP cannot exceed 60%.
(II) The main evolution process of the European debt crisis
% fiscal deficit ratio and 60% public debt ratio cap are the critical point for the outbreak of the European sovereign debt crisis. During the financial crisis from 2007 to 2008, in order to cope with its own economic downturn, European economies adopted loose monetary policies and active fiscal policies to respond, causing government debt pressure in some European economies to continue to rise.
In October 2009, the Greek government announced that its above two indicators far exceeded the critical value, officially kicking off the European debt crisis. Starting from January 2010, the Greek debt crisis further spread to other European economies such as Portugal, Spain, Italy, and Ireland, causing the Greek debt crisis to eventually evolve into the European debt crisis.
In May 2010, the EU agreed to establish a rescue plan with a total amount of up to 750 billion euros, which allowed the spread of the European debt crisis to be suspended. However, by the end of 2010, the fiscal deficit ratio of 20 of the 27 EU member states broke through the warning line, which means that the European debt crisis may not be an easy task that can be solved in the short term. In particular, the re-explosion of the Greek debt crisis and events such as Brexit further fermented the European debt crisis. It can be said that even so far, it is hard to say that the European debt crisis has completely ended.
(III) The European debt crisis has ended so far
The European debt crisis began at the end of 2009 and lasted until May 2010. However, with the recurrence of the Irish debt crisis in 2011 and the Greek debt crisis in 2015, Europe seems to have been in the vortex of the debt crisis. With the occurrence of events such as the British Prime Minister's first mention of Brexit in January 2013, the Russian-Crimea conflict in February 2014, the ECB's launch of quantitative easing in November 2014, and the full launch of the Brexit procedure from 2016 to 2018 and the final Brexit, the debt pressure corresponding to the economic fundamentals of the European region not only did not improve, but also had pressure to further deteriorate.
Since the European debt crisis, we have seen at least three relatively obvious depreciation processes, namely from July 2014 to March 2015 (from 1.40 to 1.06), from May 2018 to May 2020 (from 1.25 to 1.08), and from March 2021 to the present (from 1.25 to around 0.96). From the current perspective, economies such as Greece, Spain, Portugal and Italy, which were first affected by the European debt crisis, are still under relatively high debt pressure, and the euro's weakness is much greater than that during the European debt crisis, which means that the current situation in Europe will not be more optimistic than during the European debt crisis.
7. Conclusion and Inspiration
Combined with the past economic and financial crises since the 1980s and the current internal and external environment we are in, the author tries to give the following inspiration:
(I) Economic and financial crises are usually manifested as currency crises, debt crises or real estate crises
. Historically, economic and financial crises are usually manifested as currency crises, debt crises or real estate crises. For example, the pound crisis in 1992 and the Asian financial crisis in 1997-1998 are directly manifested as currency crises. The Argentine debt crisis in 2001 and the European sovereign debt crisis in 2010 are directly manifested as debt crises. The fuse of the financial crisis in 2007-2008 is the real estate industry crisis. Of course, there are exceptions. For example, the Japanese economic crisis since the 1990s is almost all-round, including both the capital market crisis and the real estate industry crisis. To a certain extent, the currency crisis is also mixed with it.
. As for the economic and financial crisis, the definition between the two is not so clear. Soft or recession of economic fundamentals can largely lead to financial crisis through the bursting of capital market bubbles, and financial crisis can also lead to economic crisis through the contagiousness and reflexivity of the financial system itself and changing market expectations and confidence.
. In the Jamaican system after the Bretton Woods system, the global monetary system became more unstable, and cyclical monetary crises occurred frequently, becoming the fuse that led to the outbreak of the economic and financial crisis from 1973 to 2012. For example, the Latin American financial crisis in the 1980s, the British pound crisis in 1992, the Mexico debt crisis in 1994, the Southeast Asian financial crisis in 1998, the Russian debt crisis in 1998, and the Argentina debt crisis in 2001 all have more or less shadows of the currency crisis.
On October 31, 2013, six major global central banks including the Federal Reserve, the European Central Bank, the Bank of England, the Bank of Japan, the Bank of Canada and the Swiss Central Bank converted the existing temporary bilateral liquidity swap agreement into a long-term currency agreement, and built the so-called "Atlantic System", which played an important role during the epidemic in the 2020 century. However, judging from the performance of currencies in various economies since the beginning of this year, the function of the "Atlantic System" seems to be weakening. Since the beginning of this year, the euro, the pound, the yen, the Australian dollar, the Canadian dollar and the Swiss ranch have depreciated by 14.14%, 17.18%, 30.26%, 13.99%, 9.05% and 10.28% respectively.
(II) The outbreak of economic and financial crisis is always the same as the same line, and it has never been interrupted.
The more than ten economic and financial crises that have broken out since the 1980s are not isolated, but have inseparable internal logical connections. Taking the Asian financial crisis from 1997 to 1998 and the global financial crisis from 2007 to 2008 as examples, we can roughly draw the following conclusions:
1, the Asian financial crisis from 1997 to 1998 laid some hidden dangers for the outbreak of subsequent crises
997 to 1998 Asian financial crisis was presented in the form of a currency crisis, and the fixed exchange rate system collapsed almost completely in this crisis. Southeast economies, which have experienced the lessons, began to accumulate foreign exchange reserves by increasing foreign trade exports to cope with the unexpected impact of the foreign exchange market, which ultimately made the outward characteristics of Southeast Asian economies more prominent, the connection with global economy and finance is closer, and more sensitive to changes in the external environment.
2. The 2007-2008 financial crisis can be regarded as an extension of the 1997-1998 financial crisis to some extent
007-2008 global financial crisis began with the subprime mortgage crisis in the United States, but the role of monetary factors and the lessons learned from the Asian financial crisis in 1997-1998 cannot be ignored.Specifically, the Asian financial crisis from 1997 to 1998 forced many economies to accumulate a large amount of foreign exchange reserves to cope with emergencies. The large amount of foreign exchange reserves accumulated by these economies flowed back to the United States through trial purchase of US Treasury bonds, continuously lowering the long-term interest rate level of the United States.
At the same time, non-US economies have to maintain their attractiveness to foreign investment by adopting higher interest rates. However, under the guidance of policy goals to stimulate their own economic growth and stabilize employment, all economies also have the urge to keep lowering interest rates. This demand for high interest rates and internal demand for low interest rates reflects the real difficulties faced by non-US economies to a certain extent. Internally, when interest rates fall to a sufficiently low level, its reverse slight changes, a slight recurrence of the economy, and some interference from the peripheral environment will have a serious impact on the non-US economic and financial system.
3. The financial crisis of 2007-2008 made the global economy fall into the liquidity trap extremely fragile
(1) In order to effectively respond to the financial crisis of 2007-2008, major economies had to adopt loose or even extremely loose monetary policies in a short period of time, pushing the benchmark interest rate to an extremely low level Major economies have once again continuously lowered interest rates, making zero interest rates, quantitative easing and negative interest rate policies the current monetary policy status of major economies for a long time.
(2) The low interest rate and loose liquidity environment has put many economies in the world into the "liquidity trap", greatly weakening the effect of incremental monetary policy. Some economies have to make up for the shortcomings of monetary policy through active fiscal policies, which has led to a sharp increase in debt pressure in most economies during the 2008 financial crisis and a long period afterwards.
(3) From this perspective, the low interest rate and loose liquidity environment makes the global economic and financial system extremely fragile, and the debt pressure of major European economies has also risen rapidly in a short period of time, laying hidden dangers for the outbreak of the European debt crisis. In addition to the European debt crisis, more issues worth thinking about include:
First, under extraordinary monetary policy, the debt expansion model has become the dominant factor in economic expansion. At this time, any small moves and changes in the return to normalization of monetary policy will disturb the entire financial market, especially through the monetary crisis in emerging market economies, which aggravates market expectations and tend to be pessimistic, and causes the liquidity dilemma of the real economy to worsen.
Second, in the process of promoting the economy forward, monetary policy appears to be extremely weak. Some economies expect to solve the "liquidity trap" through active fiscal policies, but this will further continuously roll into the debt expansion model of continuous rolling expansion, leading to a significant decline in the quality of existing debts, and aggravate the liquidity contraction in the financial field, further affecting the real economy.
Third, when domestic problems cannot be solved, the so-called anti-globalization trend will become the mainstream, and the external environmental disturbances caused by this will further expand the economic level to the political level, and in turn affect market expectations.
(4) From a large historical trend, for a long time since the Asian financial crisis, major economies around the world have long been accustomed to the existence of a low interest rate environment. Especially in the nearly six years from 1998 to 2004, the benchmark interest rate level continued to decline. We can see that the global financial crisis was triggered from 2005 to 2007 against the backdrop of the continuous decline in benchmark interest rates.
Subsequently, starting from 2008, major economies around the world have successively lowered the benchmark interest rate, and most countries have even lowered the benchmark interest rate to the historical lowest level of zero interest rate. For the global economy that is accustomed to a low interest rate environment, lowering interest rates cannot stimulate the investment desire of market entities, but increasing interest rates is very likely to accelerate the deterioration of the dilemma.
(III) The debt ratio of major economies in the world has continued to rise, causing the global economic and financial system to become extremely fragile
The low interest rate environment in the past long period has continuously increased the debt level and made economic growth driven by the debt expansion model a common choice for major economies in the world. It also caused the turbulence of market interest rate levels to cause the deterioration of the quality of debt assets and cause a strong shock to the economy. At the same time, the economic operation under the debt expansion model is also more sensitive.
1. From the perspective of government departments’ leverage ratio, the debt pressure in some economies cannot be underestimated
Normally, we assume that when the government departments of an economy have a higher leverage ratio, it means that the room for fiscal policy expansion will be smaller, and vice versa. Judging from the current government sector leverage levels of major economies, some economies dominated by developed countries are generally high, which makes them only hope to stimulate the economy and stabilize debt through loose monetary policies. Once monetary policy tightens, the possibility of a debt crisis breaking out in these economies will increase. In particular, several economies with high leverage ratios in government departments in Europe (such as Greece, Italy, Portugal, etc.) need special attention.
. For emerging economies, the leverage ratio of government departments is often low and has room for implementation of fiscal policies. On this basis, they can also maintain their relative advantages in fund interest rate levels. However, as far as emerging economies are concerned, the expansion of their fiscal policy may not be easy due to the complexity of interest levels. Of course, there are also some emerging economies (mainly Latin American countries) with high government leverage ratios and have developed the economy by borrowing foreign debt for a long time, which requires attention.
2. From the perspective of corporate sector leverage ratio, emerging markets cannot tolerate the impact of interest rate hikes
In recent years, the corporate sector leverage ratio of emerging market economies has increased rapidly. For example, the leverage ratio of the non-financial sector in emerging markets rose from around 55% at the end of 2008 to around 113% in 2021. On the other hand, developed economies have not changed much. Excessive leverage creates vulnerability to the non-financial enterprise sector. When market interest rates tend to rise, the debt burden pressure of the non-financial sector will increase and lead to a liquidity crisis, resulting in a series of problems in the real economy. Therefore, emerging markets cannot tolerate the impact of interest rate hikes.
(IV) The internal driving force of the outbreak of the economic and financial crisis
The internal driving force of the outbreak of the economic and financial crisis is usually that its own economic and financial and security system is relatively fragile, making its risk resistance relatively weak, and there is no reserve of effective resources and means to deal with the cyclical changes of the external environment.
1. The fragility of economic and financial systems and security systems can easily be further amplified by the sluggish confidence and expectations
The current global economic and financial system is more fragile than before. Emerging markets are easily disturbed by external policy environment due to factors such as their debt level, outstanding outward characteristics, and weak security systems. This has led to a significant increase in volatility in their financial markets, which is very likely to aggravate the dilemma of the real economy. Due to the high debt ratio of government departments, developed economies have low space and are not sustainable in terms of developmental economics, so their monetary policy has a natural motivation to continue to be loose. From this perspective, the fragility of the economic and financial system can easily generate sluggish confidence and expectations, and worsen the subjective investment desire of the real economy. The volatility of the financial market will also significantly expand, making crises happen frequently in economies with relatively weak economic and financial and security systems.
For example, the inherent driving force behind the pound crisis in 1992 and the Asian financial crisis in 1997-1998 are the instability of the European monetary system itself and the fixed exchange rate system commonly implemented in Southeast Asian economies.
2. The deterioration of debt assets quality is an important factor that cannot be ignored, especially the most obvious in the financial and real estate industry
In general, the fuse of each round of financial crisis is either the intensification of the fragility of its own economic and financial system or the sharp deterioration of its own debt assets quality. For example, in February 1997, the Bank of Thailand admitted that there were serious problems with the asset quality of its domestic banks, which gave international speculators an opportunity to take advantage of it; in 2007, many international financial institutions triggered the domino effect due to the exposure of the quality of subprime credit assets. The former was a financial system crisis, while the latter was a real estate industry crisis.
As far as we are concerned, the characteristics are more prominent. When looking back at the history of domestic financial development, we will find that asset quality problems have been running through the whole process. We once established four major AMCs because of the asset quality of state-owned banks, and also carried out local banks reorganization because of the asset quality of urban credit cooperatives and rural credit cooperatives. The so-called financial innovation has continuously pushed the accumulated asset quality problems outbreaks. In recent years, the exposure of financial risks has also been significantly intensified. The dilemma of the real estate industry and urban investment risks will to some extent further promote the release and clearance of risks. Therefore, the most important issue facing the domestic financial industry at present should also be asset quality.
(V) The external driving force for the outbreak of the economic and financial crisis is the game between the US dollar cycle and the geopolitical
The internal driving force for the outbreak of the economic and financial crisis is the relatively fragile economic and financial system, while the external driving force is the game between the US dollar cycle and the geopolitical . For example, the Latin American debt crisis and the financial crisis from 2007 to 2008 were directly triggered by the US dollar interest rate hike cycle. For example, three oil crises triggered many economic and financial crises in the 1970s and 1990s.
Although the Russian-Ukrainian conflict is not the root of this round of inflation, it has intensified global inflation pressure to some extent; while the US dollar interest rate hike cycle brings trouble to other economies, the United States itself is happy. "The US dollar is ours, and the trouble is yours" has become the basic information for American political elites to deal with geopolitical games and global inflation pressure.
It should be said that geopolitical game and the US dollar cycle are not so independent. To a certain extent, the two usually cooperate with each other to suppress geopolitical objects, such as the blockade of the pound and the euro, as well as the attacks on Russia, Latin American countries, Southeast Asian countries, etc. Therefore, geopolitical games and the US dollar cycle have become the most important driving force in triggering the economic and financial crisis.
(VI) It is still hard to say that the world has completely emerged from the financial crisis of 2007-2008 and the European debt crisis
Although the financial crisis of 2007-2008 has been 15 years and the European debt crisis has been 5 years, it is still hard to say that we have completely emerged from the above two crises. The financial crisis from 2007 to 2008 has caused the low interest rate and loose monetary environment to last for about seven years. The active fiscal policy has caused many economies around the world to bear heavy debt burdens, which can easily amplify the impact of global liquidity tightening and also laid hidden dangers for the US dollar interest rate hike cycle to impact the global economic and financial system.
The same is true for the European debt crisis around 2010. Although the debt pressure of some economies has been alleviated to a certain extent with the EU's bailout, the differentiation and instability within the EU system have not been fundamentally resolved, and the debt pressure faced by some economies has not disappeared. Therefore, although the financial crisis of 2007-2008 and the European debt crisis in 2010 have passed, they have not gone far. The sequelae brought about by a series of policies adopted to deal with the above crises and the medium- and long-term impacts it has on the global economic and financial system will still play a role from time to time, triggering possible global or local economic and financial crises.
(VII) For a long time in the future, we will be in the economic and financial crisis or hover on the edge.
. Against the backdrop of the US dollar interest rate hike cycle and the tightening of global liquidity, the debt and capital outflow pressures borne by developing countries have increased significantly. Many developed economies that have been accustomed to low interest rates and high leverage for a long time are facing greater pressure than developing countries (such as the EU, the UK, Japan, etc.).In addition to the far-reaching impact of the financial crisis from 2007 to 2008 and the European debt crisis in 2009, the disturbances of stock and geopolitical games on the global economic and financial system have also been significantly intensified. The national security strategy released by the White House on October 12, 2022 pointed out that the next ten years are crucial for the United States to win geopolitical opponents, which means that geopolitical games will be more intense in the next ten years, and the global industrial chain and supply chain may be reshaped, causing the global economic and financial system to enter a relatively severe period of great turmoil.
The current conflict in Russia and Ukraine has put the European region in dire straits. The ongoing Indo-Pacific game indicates that the Asia-Pacific region will not be calm in the future. Inflation itself has also transitioned from the so-called economic phenomenon to a tool of geopolitical game. The general weakness of currencies in non-US economies and the rise in debt pressure, the reconstruction of the global supply system, the weakening of market expectations and the general decline in confidence will normalize the global economic and financial system under geopolitical game, making us always hover on the brink of the economic and financial crisis.
