1. GLOBAL FINANCIAL CRISIS: GLOBAL? FINANCIAL? CRISIS (singular)? Andrei Illarionov, Cato Institute, Washington, USA, Institute of Economic Analysis, Moscow, Russia EFWN Annual Conference “Economic Freedom in Times of Crisis” Wroclaw, Poland, October 01, 2009 © Cato Institute, Institute of Economic Ananlysis www.cato.orgwww.cato.org, www.cato.ru, www.iea.ru www.cato.ruwww.iea.ru www.cato.orgwww.cato.ruwww.iea.ru

2. © ИЭА 2 Global? Exceptions: 1. East Asia: China, Mongolia, Indonesia, Myanmar, Vietnam. 2. South Asia: India, Bangladesh, Nepal, Pakistan, Sri Lanka. 3. Australasia, incl. Australia, Brunei, Papua NG. 4. Middle East, incl. Afghanistan, Cyprus, Egypt, Iran, Iraq, Lebanon, Morocco, Syria, Qatar. 5. Africa, incl. Congo, Ethiopia, Kenya, Mauritania, Mozambique, Nigeria, Tanzania, Uganda. 6. Latin America, incl. Bolivia, Chile, Colombia, Costa Rica, Guatemala, Honduras, Panama, Paraguay, Peru, Uruguay. 7. FSU, incl. Azerbaijan, Kyrgyzstan, Tajikistan, Turkmenistan, Uzbekistan. 8. Europe: Albania, Poland.

3. © ИЭА 3 Financial? Examples of Financial Crises : 1. Inflationary – No. 2. Currency – No. 3. Stock market – Yes. 4. Credit – Yes. 5. Banking – Yes. 6. Budget – No. 7. Government Debt – No. 8. Private Debt – Yes.

4. © ИЭА 4 Crisis? Crises in 2007-2009 : 1. National and regional ones, not a global one. 2. Classic «Austrian». 3. Stock market. 4. Banking. 5. Industrial. 6. Trade.

5. © ИЭА 5 1.“Austrian” crises

6. © ИЭА 6 NASDAQ, January 1988 – December 2002.

7. © ИЭА 7 US Housing Prices (Case-Schiller Index), January 1987 – June 2009.

8. © ИЭА 8 DJ Industrial, 1990-2009.

9. © ИЭА 9 World Wheat Prices, January 1987 – July 2009.

10. © ИЭА 10 World Oil Prices, January 1985 – August 2009.

11. © ИЭА 11 Bubbles in different assets (1994 г. = 100%), January 1987 – August 2009.

12. © ИЭА 12 Annual Growth Rates of M2 in the USA, August 1987 – August 2009.

13. © ИЭА 13 Rough Measure of Excess Liquidity in the USA (Money minus Real GDP minus CPI), growth rates, % Source: IFS.

14. © ИЭА 14 2. Stock Markets Crises

15. © ИЭА 15 DJ vs. World vs. Emerging Markets (19.05.08=100%)

16. © ИЭА 16 Commodities-driven crisis?

17. © ИЭА 17 DJI-26,1% MSCI WORLD -28,6% MSCI EM -29,0% MSCI Average of 16 oil-exporting countries -41,6% Brent Spot Price -42,3% RTSI-53,2% Stock Markets vs. Oil prices, May 19, 2008 – September 10, 2009

18. © ИЭА 18 Decline in Stock Markets in Oil-Exporters, May 19, 2008 – March 9, 2009.

19. © ИЭА 19 Stock Markets Performance in Oil-Exporters, March 9 – September 10, 2009.

20. © ИЭА 20 National Stock Markets: Russia vs. Saudi Arabia Sources: РТС, MSCI.

21. © ИЭА 21 World Oil price and RTSI, January 1998 – September 2009. Sources: RTSI, US EIA, NYMEX.

22. © ИЭА 22 World Oil Prices and RTSI, January 2008 – September 2009. Source: RTSI, US EIA.

23. © ИЭА 23 This is not a commodities-driven crisis.

24. © ИЭА 24 RTSI relative to DJ Industrial (19.05.08=100%) Source: RTSI, IEA.

25. © ИЭА 25 This is a policy-induced crisis.

26. © ИЭА 26 Stock market performance in 68 countries, August 7 – October 27, 2008. Source: MSCI.

27. © ИЭА 27 This is a geopolitical crisis.

28. © ИЭА 28 3. Industrial Recession

29. © ИЭА 29 Length of Industrial Decline to February 2009

30. © ИЭА 30 Who Was First? And Who Followed? Decline in Industrial Output from the Peak = 100%. Source: ECE, UNECE, National Statistics.

31. © ИЭА 31 The international crises were not originated in the US.

32. © ИЭА 32 Depth of Industrial Decline from the Peak to the Bottom before June 2009, %

33. © ИЭА 33 Cause – Institutional Heritage of Planned Economy?

34. © ИЭА 34 Average Monthly Rates of Industrial Decline, %

35. © ИЭА 35 Length of Recovery After Slump till June 2009

36. © ИЭА 36 Cumulative Growth After the Bottom of the Industrial Slump, %

37. © ИЭА 37 Monthly Growth Rates of Industrial Growth since the Bottom, %

38. © ИЭА 38 Transition economies were weaker in the slump, but turn out to be more flexible and dynamic in the recovery.

39. © ИЭА 39 4. Oil Crisis

40. © ИЭА 40 World Oil Output Source: Energy Information Administration.

41. © ИЭА 41 Length of Oil Output Decline till June 2009 Source: Energy Information Administration.

42. © ИЭА 42 Depth in Monthly Oil Output Decline from the Peak till June 2009, % Source: Energy Information Administration.

43. © ИЭА 43 Monthly Rates of Decline in Oil Output During the Crisis Source: Energy Information Administration.

44. © ИЭА 44 This is an OPEC-induced Crisis.

45. © ИЭА 45 5. Steel Crisis

46. © ИЭА 46 World Monthly Steel Output Source: World Steel Association.

47. © ИЭА 47 Length of Decline in Monthly Steel Output, January 2008 – June 2009 Source: World Steel Association.

48. © ИЭА 48 Depth of Decline in Monthly Steel Output from the Peak till June 2009. Source: World Steel Association.

49. © ИЭА 49 Average Monthly Rates of Decline in Steel Output During Slump, January 2008 – June 2009. Source: World Steel Association.

50. © ИЭА 50 Cumulative Increase in Monthly Steel Output since the Bottom, January 2008 – June 2009. Source: World Steel Association.

51. © ИЭА 51 Russia’s Share in the World Steel Output Source: IEA based on data from the World Steel Association.

52. © ИЭА 52 EU’ Share in the World Steel Output Source: IEA based on data from the World Steel Association.

53. © ИЭА 53 US Share in the World Steel Output Source: IEA based on data from the World Steel Association.

54. © ИЭА 54 China’s Share in the World Steel Output Source: IEA based on data from the World Steel Association.

55. © ИЭА 55 This is a structural crisis.

56. © ИЭА 56 Keynesianism at Work: Creation of Great Depression, 1929-1933. Source: Historical Statistics of the USA.

57. © ИЭА 57 Keynesianism at Work: How Fiscal Stimulus Killed Japanese Economic Miracle, 1960-2007. Source: Historical Statistics of Japan.

58. © ИЭА 58 Economic policy response will be the 2 nd wave crisis.

59. © ИЭА 59 “Bunch of Crises” in 2007-2009 : 1. «Austrian». 2. Geopolitical. 3. Institutional. 4. Structural. 5. Banking. 6. Economic Policy Response. Special Note: Not all crises were originated in or triggered by the US crisis.