Fighting financial crises as a tsunami: stopping the wave in 8 steps

Financial crises have happened time and time again throughout history. But what can we do specifically about her Prävention do?

The shaft starts driving

What was particularly fascinating for me was to see how the financial crisis of 2009 spread in space and time and how events that seem to be separate from each other suddenly come together to form an overall picture.

It started with the events around Bankers Trust and Andy Krieger in January 1988. An internal bank audit showed that option trader Andy Krieger creatively embellished his trading results. In order to avoid a public scandal, the events were concealed and the books manipulated with the help of the international auditing firm Ernst and Young.

Although only a few were affected and no one was harmed, it should prove a big mistake that the wave was not stopped here. Since the case was too complex for the prosecutor, there was no charge. This would send a clear signal to the capital market - the manipulation of books pays off! And the wave could take full swing.

The wave calls for their first victims

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Not five years later, the wave caught its first innocent victims - in December 1994 had due to complex interest speculation Orange County, a district in the state of California, bankruptcy. Treasurer Robert L. Citron at the time speculated on interest rates for innovative bond products developed by Salomon Brothers and Credit Suisse First Boston.

He completely overlooked that Risksthat the interest rate landscape can change overnight. As a result, Orange County filed for bankruptcy and Orange County citizens suffered significant cuts in government benefits as well as higher taxes. For the first time, the wave had caught voters who, although they were not involved in the speculation, were asked to pay

The wave threatens the USA

It would now be less than four years before the wave threatened to overturn the entire financial system of the United States. What happened? - Long-Term Capital Management ”(LTCM) was a 1994 by John Meriwether (former vice-Executive and head of bond trading at Salomon Brothers) established hedge funds. In 1998 the Russian government suspended payments on bonds and devalued the ruble massively.

LTCM lost a fortune overnight and could only be rescued by the intervention of the US Federal Reserve, led by Alan Greenspan. In April 1999, President Bill Clinton had to publish a report on the financial crisis.

The US banking system from collapse?

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For the first time, the entire banking system in the United States of America was on the brink of collapse and millions of citizens would have been saved for their savings.

It was only thanks to the rapid intervention of the central bank and the President of the USA that the worst could be prevented. But the wave was not stopped, but spread undisturbed.

The wave unfolds its full destructive power

After the wave was not contained in the USA, it was now able to expand unhindered and with full force to Europe. What we today in retrospect as the beginning of the financialCrisis designate is in reality its continuation! Richard Fuld, the CEO of one of America's largest investment banks, made a big deal out of reselling real estate loans to European banks Shop.

But what initially appeared to be a safe investment soon broke into smoke and sound. Due to the high losses and write-downs of the credit portfolio, Lehman Brothers had to take part in the 15. September 2008 filed for bankruptcy and thus initiated the most severe global economic crisis since the 20 years.

Desperate politicians

A nationalization wave begins, as a desperate attempt by the politicians to save the financial system and thus the real economy. However, in vain. More and more banks must be forced to state and taxpayments are being pumped out of the financial system.

Now really all citizens of old and new Welt affected. Government budgets are cut, millions of jobs are destroyed and social unrest is provoked. The wave has reached its peak and there is no end in sight

The wave draws ever larger circles

What we learn from these examples: they are all connected and show that the wave is getting bigger and bigger around the world People captured with their destructive power.

While only a few were indirectly affected by the wave at the beginning of the 90s, we are now all directly or indirectly exposed to the destructive forces of the wave!

The question that arises: does it have to be like this? The answer is simple”No”. Against such waves essentially 8 steps unterneThat is the urgent question here.hmen. But how can we all do something against such waves?

8 steps against financial crises and tsunami waves

Or more precisely: What has to go in Future done what not to do to avoid another tsunami disaster? Can each of us contribute something?

1. Raise interest rates

The tsunami model shows very clear on that the previous procedure does not useful is. instead of that Problem to grab the roots and stop the wave. is becoming more and more Money them System added and thus further expanded the wave.

The first and most important step would therefore be to take money out of the system and not to bring it new. This means that the interest has to be raised, so that the money becomes more expensive.

2. Break free from the drug of cheap money

We all are currently dependent on the drug of cheap money. In theory, private consumption and investment in jobs are to be promoted. Unfortunately, the money is not used for jobs and long-term investments, but primarily to serve creditors.

mine Opinions after we have to change this thinking. We have to turn the interest rate screw and thus return to a healthy ratio of dept and consumption come.

3. Break with the idea of ​​“healthy saving”

Just as wrong as that Idea Fighting the crisis with debt is the second approach healthy to save. To reorganize state budgets in the short term by radically expenditure-Page reduced and screwed on the revenue side, has never worked until now.

The state budget can only go through Innovation and growth sustained be sanitized. As we learn from history and see clearly today through Greece, a forced cut in government spending leads to social unrest and is therefore in none Costs– Benefit relation.

4. Invest in long-term, value-creating projects

Rather, it makes sense to change the distribution of funds and to invest in long-term value-adding projects invest and stop waste. However, this requires a high degree of foresight and state behavior from the acting politicians and interest groups.

In a networked world, it is quite reasonable that every one of us assumes more responsibility and directly or indirectly influences the use of the control means.

5. We need more say

A fatal error to which all politicians and bank bosses in Europe were subject is the thesis that one must support systemically important banks so that the crisis does not spread any further. This is clearly the wrong way to go.

The fact that banks and financial service providers, who no longer have a healthy business model, will artificially keep billions of taxpayers' money keeps the crisis going.

6. Send banks into orderly bankruptcy

Politicians and regulators urgently need to create ways to send banks into orderly bankruptcy and stopto throw our good money after bad. The savings of the citizens are to be secured and the speculative debts of a bank are simply deleted.

Thus, those institutions and banks that have so far earned a great deal with the sale of structured products would now also have to stand up for the risk.

7. Citizens, fight back against wasting taxpayers ’money

We as Courage– Citizens must finally defend us against the wrong use of our tax money by demanding more say in the use of our tax money.

In the future, as proposed by the Minister of Finance in Austria, there should be specific levies that will strengthen competition and create new jobs in the medium term.

8. Taxpayers who decide for themselves how their taxes are used

Each taxpayer should have the right to decide on the use of part of his duties. This may sound utopian, but we have already discussed in detail in Austria and should be implemented in my opinion.

Only if we manage to change the financial system from the ground up by putting a stop to greed and the negative sides of innovation, breaking with existing paradigms such as “debt making” and “healthy saving” and committing to sustainable use the tax– If we use resources, we will emerge stronger from this crisis. It is – also – in our hands!

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