Financial crisis, also known as financial storm, refers to the sharp, short-term and super-cycle deterioration of all or most financial indicators of a country or several countries and regions (such as short-term interest rates, monetary assets, securities, real estate, land prices, the number of commercial bankruptcies and the number of bankruptcies of financial institutions).
[ Edit this paragraph] Types of financial crisis can be
. In recent years, the financial crisis has increasingly presented some mixed forms of crisis.
[ Edit this paragraph] Features
It is characterized by people's expectation that the economy will be more pessimistic in the future, and the currency value in the whole region has greatly depreciated, resulting in great losses in economic aggregate and economic scale and a blow to economic growth. It is often accompanied by a large number of business closures, rising unemployment rate, general economic depression in society, and sometimes even social unrest or national political turmoil. On the issue of dealing with the Asian financial crisis that shocked the world, Zhu Rongji firmly stated on many important occasions that "the RMB will never depreciate and will not increase the crisis and difficulties of other Asian countries and regions." "We are part of Asia, we are in the same boat, and we will never take advantage of others' danger." The image of the China government represented by Zhu Rongji has won the respect and praise of the international community. Media at home and abroad generally believe that Zhu Rongji is leading the people of China out of the predicament in the tide of economic reform. The best person to go to the light. (The above content is excerpted from "On the Linguistic Features of Zhu Rongji's Speech" in the 1th issue of Applied Writing magazine in 1998)
[ Edit this paragraph] The American financial crisis has gone through three stages
The Wall Street storm caused by the American subprime mortgage crisis has now evolved into a global financial crisis. The rapid development, large quantity and great influence of this process can be said to be unexpected. Generally speaking, it can be divided into three stages: first, the debt crisis, the problems caused by the failure of housing lenders to repay the principal and interest on time. The second stage is the crisis of liquidity. Due to the debt crisis, some financial institutions in these financial institutions can't have enough liquidity in time to meet the creditors' requirements for liquidation. The third stage is the credit crisis. That is to say, people have doubts about financial activities based on credit, resulting in such a crisis.
[ Edit this paragraph] Memorabilia of Financial Crisis
On March 18th, 28, the Federal Reserve decided to reduce the overnight lending rate of commercial banks from 3.% to 2.25%. On March 16th, 28, the Federal Reserve decided to reduce the discount rate from 3.5% to 3.25%.
On January 31st, 28, the Hong Kong Monetary Authority announced that the basic interest rate would be lowered by 5 basis points to 4.5%.
on January 29th, 28, the overnight lending rate of Federal Reserve commercial banks was reduced from 3.5% to 3.%.
On January 29th, 28, the Federal Reserve provided $3 billion to commercial banks through loan auction.
On January 24th, 28, Morgan Stanley said that it would lay off about 1, people in one week. Bank of America and Wachovia Bank announced that their profits dropped by 95% and 98% respectively in the fourth quarter of 27.
On January 22nd, 28, the Federal Reserve lowered its benchmark interest rate by .75 percentage point to 3.5%.
On October 5th, 27, both the Dow Jones index and the Standard & Poor's index set an all-time high, and the latter also set an all-time high closing point.
On September 21st, 27, the Federal Reserve injected $3 billion into the banking system through an overnight repurchase agreement.
on September 19th, 27, the Federal Reserve injected $9.75 billion into the banking system through the overnight repurchase agreement, reducing the overnight lending rate of commercial banks to 4.75%.
On September 14th, 27, the interest rate of American housing loan dropped to the lowest level in four months.
on September 12, 27, Citigroup provided 214 dollars to finance company GMAC；; The European Central Bank injected 75 billion euros into the banking system again.
On September 6, 27, the European Central Bank decided to keep the benchmark interest rate in the euro zone unchanged at 4%; The Bank of England announced that it would keep its benchmark interest rate unchanged at 5.75%.
On September 6th, 27, the interbank lending rate in the UK rose sharply recently, reaching the highest level in the past nine years.
On September 5th, 27, the Federal Reserve injected $8.5 billion into the banking system through an overnight repurchase agreement.
On September 4th, 27, the Federal Reserve injected $5 billion into the banking system through a two-day repurchase agreement. The U.S. manufacturing activity index fell to its lowest level in nearly five months in August.
On August 31st, 27, Barclays Bank borrowed about 1.6 billion pounds of emergency reserve from the Bank of England for the second time; Ameriquest, the main subprime mortgage company in the United States, no longer accepts new mortgage applications.
on August 31st, 27, Royal Bank of Scotland (RBS) reduced the number of employees in its investment banking department responsible for the US market.
On August 3th, 27, the Federal Reserve injected another $1 billion into the financial system. The Bank of England lent 1.6 billion pounds at a punitive interest rate of 6.75%.
On August 29th, 27, the Federal Reserve injected 5.25 billion dollars into the financial system again; Federal Reserve Chairman Ben Bernanke sent a letter to the U.S. Congress, suggesting that Congress try to help borrowers in the subprime mortgage loan market.
On August 29th, 27, the share prices of Bear Stearns, Citigroup and Lehman Brothers all plunged. In the second quarter, the US house price index showed the biggest decline in 2 years.
On August 28th, 27, the credit card default rate of American consumers increased by 3% compared with the same period of last year. Investors sold shares of Southeast Asian banks, and Citigroup lowered the year-end target of the Straits Times Index.
On August 28th, 27, the Federal Reserve injected 9.5 billion dollars into the financial system again; The profit forecast of Countrywide Financial Corp, the largest mortgage company in the United States, was lowered by Lehman Brothers. Goldman Sachs lowered its third-quarter profit forecasts for Bear Stearns, Lehman Brothers and Morgan Stanley.
On August 27th, 27, China Construction Bank said that it held US$ 1.6 billion in subprime mortgage-backed securities in the United States, and had withdrawn RMB 139 million as loss provision for mortgage-backed securities investment.
On August 24th, 27, the Bank of Japan recovered 3 billion yen from the financial market; The Federal Reserve injected $17.25 billion into the financial system.
On August 23rd, 27, the Federal Reserve injected another $7 billion into the financial system; The European Central Bank once again injected 4 billion euros into the financial system; Lehman Brothers closed its mortgage subsidiary; The four major American banks borrowed $2 billion from the discount window of the Federal Reserve.
On August 23rd, 27, most major stock markets in the Asia-Pacific region rose; ICBC and Bank of China have issued semi-annual reports one after another. The former holds $1.229 billion in subprime-related bonds, while the latter holds more than $9 billion in such assets.
On August 22nd, 27, the Federal Reserve injected another $2 billion into the financial system.
On August 21st, 27, the Bank of Japan announced that it would inject another 8 billion yen into the bank. The Federal Reserve injected another $3.75 billion into the financial system; National Financial Corporation confirmed that it has laid off 5 employees in the mortgage business department.
On August 2th, 27, the Bank of Japan injected 1 trillion yen into the banking system, and the Federal Reserve injected another 3.5 billion dollars into the financial system, so the Japanese stock market soared.
On August 18th, 27, the Federal Reserve lowered the discount rate and the new york stock market rebounded sharply. The German stock market also rose sharply because the Federal Reserve cut the discount rate.
on August 17, 27, the decline of European and American stock markets narrowed, while that of Japan and emerging markets continued to fall. Hong Kong's Hang Seng Index once fell below 2, points, and the index of state-owned enterprises once fell by more than 1%. The Federal Reserve lowered the rediscount rate by .5 percentage point to 5.75%.
On August 17th, 27, the Federal Reserve injected another $17 billion into the financial system; National Finance Corporation, the largest commercial mortgage company in America, is facing bankruptcy; Global stock markets plunged again.
On August 16th, 27, the Federal Reserve injected another $7 billion into the financial system; Global stock markets plunged. Stock markets in Japan and emerging markets fell far more than those in Europe and America.
On August 15th, 27, the European Central Bank and the Federal Reserve considered making currency swap arrangements; The European Central Bank has injected more than 21 billion euros into the euro zone banking system; Bank of America began to refuse to issue loans with subprime credit as collateral.
On August 14th, 27, the three major central banks of the United States, Europe and Japan injected more than $72 billion to rescue the market. The Asia-Pacific central bank will inject capital into the banking system again.
On August 11th, 27, central banks around the world injected more than $326.2 billion to rescue the market within 48 hours; The Federal Reserve injected $38 billion into the banking system three times a day.
from August 9 to 1, 27, the central banks of Europe, the United States, Canada, Australia and Japan injected US$ 32.3 billion into the global economy.
In August 27, Bank of China and Industrial and Commercial Bank of China were involved in the "American subprime mortgage storm".
in August 27, Countrywide, the largest mortgage company in the United States, said that the turmoil in the subprime mortgage market began to affect high-quality mortgage loans.
In July 27, Standard & Poor's and Moody's issued a warning on bonds backed by more than $17 billion high-risk mortgages.
In July, 27, the funds of McGree Bank were damaged in the subprime mortgage market.
in July 27, American HomeMortgage Investment closed down.
in June, 27, two hedge funds under Bear Stearns suffered heavy losses because they invested in the subprime mortgage market.
in April, 27, the risks in the subprime mortgage credit market suddenly appeared-starting with the application for bankruptcy protection by the mortgage company in the new century.
[ Edit this paragraph] There are new features in the contagion mechanism of international financial crisis:
Financial crisis caused by external factors and international contagion of financial crisis are not recent phenomena. In 1873, the economic prosperity of Germany and Austria attracted capital to stay at home, and foreign credit suddenly stopped, which led to difficulties in the operation of American Jay Cook Company. In 189, Bahrain Brothers Investment Bank in London had a payment crisis against Argentine creditor's rights. In addition, a financial crisis occurred in new york in October of that year, and a series of enterprises in London closed down. Bahrain Bank almost closed down in November of that year, only with the help of a syndicated guarantee fund led by William Lidderdale, governor of the Bank of England, it was spared. However, the British loans to South Africa, Australia, the United States and other Latin American countries fell sharply, resulting in the economic crisis in these countries and regions until 1893. In the spring of 1928, new york's stock market began to prosper, which drained the source of credit that could have been invested in Germany and Latin America, leading to economic depression in these countries and regions. The suspension of overseas credit is likely to accelerate the overseas economic recession, which in turn will have an impact on the countries that have caused all this. In the 199s, with the expansion of international hot money, international monetary and financial crises broke out frequently. According to a study completed by Barry Eisengreen and Michael Bodo in 21, the probability of financial crisis in a randomly selected country is twice as high as that in 1973, and the contagiousness of international monetary and financial crises is greatly enhanced, which often spreads from the country or region where the crisis broke out as quickly as infectious diseases. The media left many words to describe this phenomenon: "tequila effect", "Asian flu" and "Russian virus" of the Mexican crisis in 1994, and the research on the contagion mechanism of currency and financial crisis also rose rapidly. Because a variety of crisis contagion mechanisms need to be realized under the opening conditions of capital account and financial market, to a great extent, China survived the Asian financial crisis in 1997 by relying on the moderate control of capital account and the low openness of financial service market. But today, with the changes of China's economic and financial situation, although China's capital account is still not fully open, the risk of crisis contagion has greatly increased, and the American subprime mortgage crisis that shocked the international financial market has sounded the alarm for us, indicating that the international financial crisis contagion mechanism has emerged new features.
The international contagion channels of currency and financial crisis in a broad sense can be divided into two categories: non-sporadic contagion channels and sporadic contagion channels. The former refers to the contagion channels that both existed in the stable period and the crisis period before the crisis broke out. The latter refers to the infection channel that only appears after the crisis. Because the first type of contagion channel originates from the actual economic and financial ties between countries or regions, and the contagion of the crisis comes from the change of macroeconomic fundamentals, it is also called "real contact channel" or "contagion based on fundamentals", which mainly includes trade ties and competitive devaluation, policy adjustment, random aggregate demand liquidity shock and so on. Occasional contagion has nothing to do with economic fundamentals, but is only the result of the behavior of investors or other participants in the financial market (especially irrational behavior), so it is also called "real contagion" and "pure contagion", mainly including endogenous liquidity shock, multiple equilibrium and wake-up effect, political influence contagion and so on. However, these contagion mechanisms are often based on trade links and the investment of "central" countries in "marginal" countries, because institutional investors from developed countries have abandoned emerging market assets and pursued high-quality assets in their home countries. As far as the impact of the US subprime mortgage crisis on China is concerned, the role of trade links and foreign investment mechanism in China may not be very critical. On the contrary, China's foreign investment and China's overseas listing may become the most important ways of crisis contagion, and the importance of such ways of crisis contagion will increase day by day.
[ Edit this paragraph] Why did the financial crisis occur
The current financial crisis was caused by the bubble in the US housing market. In some ways, this financial crisis is similar to other crises that broke out every four to ten years after the end of the Second World War.
however, there are essential differences between financial crises. The current crisis marks the end of the era of credit expansion, which is based on the US dollar as the global reserve currency. Other cyclical crises are part of the larger boom-bust process. The current financial crisis is the peak of a super-boom cycle, which has lasted for more than 6 years.
boom-bust cycles usually revolve around the credit situation, and always involve a prejudice or misunderstanding. This is usually a failure to recognize that there is a reflexiv between the willingness to lend and the value of collateral.