FINANCIAL CRISIS AND INTERNATIONAL INDEBTEDNESS

Abstract

We are witnesses of one of the greatest financial crisis in the human history. Today we have a clear picture, figures, and greatest losers. There is not an economic activity that has not been affected by this crisis. Nevertheless, it is about a crisis of a whole system and doctrine. Whatever the final outcome is there will be deep impact on the financial system.The experience shows that the financial crisis never appears as an isolated crisis, but it appears typically as a sector crisis that additionally spreads in the other sectors.The economists point out that the nucleus of the world financial crisis is the so called mortgage loans. But the financial crisis started a lot earlier with the cancellation of the direct international convertibility of the United States dollar to gold (1971) and since then money emission has not been limited by anything. Thus, the dollar became a world currency, and the USA gained a status of a hegemonic force that adopted the concept of fully free market and neoliberalism with the thesis that if every financial and economic problem appeared it would be solved with an absolutely free market.Holding on to this concept in the USA, every control and inspection regarding the behavior of the market was abolished and it was transferred to all other countries directly or indirectly through IMF and World Bank. Since the profit is higher in the financial rather than the real sector, the capital moves from the real to the financial sector. The financial sector starts to grow uncontrollably. The traditional conservative banking transforms, new institutions emerge, new financial products are created. Due to the above, the financial sector develops independently and incomparably faster than the real economy.The growth of the financial sector and its globalization is also provided by the dynamic deregulation, the development of hard technologies – informatics and telecommunications, as well as the development of soft technologies – the financial products are getting more numerous. The financial market has become global, gigantic financial subjects, banks and others have developed and become too big to fail. As a result of the international actions for saving the financial system after September 2008 and the collapse of LIMAN BROTHERS, the huge debts that were accumulated by the bank and the private sector, were transferred to the public sector. The debts of the governments have experienced real explosion worldwide, not because of the multibillion operations for saving the banks and the corporations but because of the fall of the tax income and the increase of the public consumption that lead to global crisis.Somewhere between the interests of the banks, blinded by the desire for easy profits, and the governments of the developing countries, led by the idea of overcoming the gap between the poverty and the opulence, the basic rules of credit analysis were neglected. The purpose of this euphoric atmosphere was supported by the international financial institutions that considered that the extensive indebtedness could stimulate the economic development.