A financial crisis is a disturbance of the money system, which entails substantial force shifts at the market or restrictions of the functionality of the money system.

A financial crisis entails nearly always an economic crisis.

There are many ways, which lead into a financial crisis:

• Deflation: The money is held back, because it becomes with the time more value than the goods. It loses thereby its article of exchange function.
• Inflation: Goods are held back, because they lose less with the time at value than the money. The money loses thereby its article of exchange function.
• Traps of the property market: If credits with real estates are besichert and if the market value of the real estates falls, then thereby also the safety device of the credits falls. Now if the debtors become insolvent, then the bank can pay the money credit back, which it took up from the issuing bank against own proofs of indebtness, not from the auction of the real estates. Therefore it clings with its own capital funds. If it uses however customer assets, in order to receive the liquidity for the credit, then the bank clings with the customer inserts. This however not immediately evident, but only then, if customers want to take their assets off, because only then is forced the bank to pawn for this cash proof of indebtness of the issuing bank whereby those is limited the value of werthaltiger proofs of indebtness. There are two possibilities:
  • The issuing bank refuses the further expenditure of cash to the bank without werthaltige titles to pawn. In this case the bank cannot pay to its insert customers. An insolvent bank shaken according to experience the confidence into the entire bank system and leads to panic-like cash taking off. This again is answered according to experience by the respective government with bank holidays.
  • The issuing bank does not refuse the further expenditure of cash to the bank, although it can pawn only risikohaltige or worthless proofs of indebtness. In this case as a whole less value (in the form of pawned proofs of indebtness) faces the cash quantity than before. This worthlessness turns out sometime openly. It comes to the inflation. Therefore the owners of asset want to convert as much money as possible into goods, since goods purge into times of inflation less strongly than money. Therefore strengthens money taken off. In order to contain the inflation, the respective government will try according to experience to keep the inquire-effective money supply small. Therefore the respective government will proclaim bank holidays according to experience.
• Increase of unemployment: If someone took up a credit, in order to buy for example a house, and becomes this unemployed, then it can pay its credit any longer. Therefore the credit giver becomes the house, which serves as security for the credit, auctions. If this form concerns fortune loss many people (and happened, if unemployment rises), then a sales pressure on the property market develops, many more real estates is sold than being bought. Consequence is a price purge at the property market (see above).

High unemployment and a falling Immoblienmarkt are thus early indicators for a financial crisis. Their consequence are often bank holidays (nominal possession with no material value, there with immovable assets no purchase possible), inflation (material possession of worthless paper) or both; effectively the expropriation of the masses. In addition nearly always comes the absence of an article of exchange, which makes an economic crisis from the financial crisis, because without articles of exchange no arbeitsteilige economy is possible.

Articles in category "Financial crisis"

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