1. The Economic Crisis of Today Cemus 26 september 2012 Erik Andersson

2. Today’s economic crises How did it start? What happened and why? Tendencies now?

3. 1997 CDS derivative invented Chinese monetary policy -> exports US stock and credit boom -> imports US trade deficit China saves in US bonds

4. 2000 Dot com-bubbel bursts Low interest rates Glass-Steagall act scrapped self regulation and rationality CDO/MBS spreads

5. 2001 9/11 War on terror & Afghanistan Lower interest rates US twin deficit Budget – from Tax cuts and war Trade Asian & European trade surpluses Saved in US bonds Asset price bubble Housing bubble Debt-financed consumption

6. 2003 Irak 2004 IMF warns for ”global housing boom” 2005 CDS market expands rapidly

7. The crisis starts 2007 mortgage-/real estate crisis in USA Spreads to Europe (Baltics, PIIGs, etc) CDOs and CDSs tip market (actors) over the edge 2008 Lehman defaults => financial chock-wave No-one lends on global financial market Liquidity support from central banks

8. 2009: Global crisis management G20 London and Pittsburgh: IMF gets 750 billion USD OECD swear allegience FSF -> FSB to oversee regulation on financial market: “Basel II” Free trade support Credit/loans to the South

9. National crisis management Bank support TARP in US, Bankgurantees in Irland, etc Industry support Germany and US “cash for clunkers” Low interest rate policies

10. Effects - Layoffs/unemployment when investment and consumption dwindled - Asset and housing slumps - Soaring budget deficits

11. Who was hit? “Subprime” home-owners Laid off workers Savers Who was not hit? “Prime” home-owners Stockholders

12. 2009 – 2011 Big corporate profits back, on smaller sales Stock-market regains / Budget crisis in Greece, Ireland, Spain, UK, Italy, Baltic countries etc. European austerity policies begin

13. USA monstrous budget deficit, big support packages for the national economy, weak job figures

14. World trade up 25% since 2009, back to pre-crisis levels, but stalling World merchandise trade volume, 2005Q1-2013Q4 Seasonally adjusted index, 2005Q1=100 Source: WTO Secretariat. http://www.wto.org/english/news_e/pres12_e/pr676_e.htm

15. The EURO Effects of crises in sum: Bubble-inflated budgets shrink, at the same time as bank bail-out, social benefits and industrial support becomes necessary. In the wake of this: austerity policies in Greece, Ireland, Spain, Portugal, etc.. to restore budget balance/creditworthiness to the benefit of the credibility and stability of the EURO

16. 2012 Negative growth in most of Euro-zone Stagnant EU

17. China slowing down Merchandise exports and imports of China, 2010Q1-2012Q2 (year-over-year % change in volume, not seasonally adjusted) Source: WTO Secretariat.

18. China contd. Stimulus packages Infrastructure investment Command bank-lending Unclear effect Unclear fiscal and financial situation Of state, banks and regions Stock market also down…

19. To sum up The crisis is both fiscal, financial and industrial hurting both North and South more along social divide than geographical middle and working class worst hit the well-off group better off than ever conventional crisis management so far Big opening for creative solutions!!