THE ORIGINS OF THE FINANCIAL CRISIS
THE FALL OF THE EMPIRE OF DEBT
By the end of 2004, the Free World Academy reported some disturbing facts (Increase of migrations, grand corruption, etc) that were not in accordance with the globalization scheme (go to Malaise in globalization). By 2005, the Free World Academy posited that the US economy was not shielded from the risks of a new great depression (go to future of the USA). Indeed, we have largely displayed warnings! (1)
The globalization has led to macroeconomic imbalances. Instead of dealing with these issues, the US has used immigration to pressure the wages of the native labor force. Since such a policy could restrict the consumption and finally the growth, the government has favored a massive indebtedness to compensate the stagnation of wages. Of course, these policies are the root causes of the financial crisis. (2)
Regarding the causes of the financial crisis, most observers invoke the Central Bank’ policy, the government sponsored enterprises (Fanny and Freddie), the deregulation and the financial innovations. According to our opinion, these policies have propagated the crisis. However, they are not the causes of an international meltdown.
11-Central Bank policy
The FED is blamed to have provided the economy with a big amount of liquidities, boosting speculation and the housing bubble. In fact, in March 2000, the dot com bubble burst and the crash had negative repercussions on the US economy. This process was worsened by the 9/11 attacks, which led to the temporary closure of the financial markets.
As a result, the FED cut interest rates to stimulate economic growth. Then, it started to raise the interest rate from 1% in 2004 to 5.25% in June 2006. However, mortgage rates in the U.S. remained low because of the inflow of money from emerging countries and oil-producers. Clearly, the FED has performed its job in avoiding a recession in 2002 and the monetary...