The Economic and Financial Crisis: Genesis and Exit Strategies

With this work I provide a deep and wide view on the global financial crisis. My work starts with an overview on the Austrian school theories provided by Murray N. Rothbard in his work “American’s Great Depression”, and its dissertation on the genesis of the Crisis of 1929. Then, after some consideration on the Rothbard’s work, I shift my attention on causes of the current crisis considering the solutions proposed by the different Governments. The first chapter is based on the description of the igniting causes of the current economic downturn. I focus on the crisis’s triggering factors, starting from the house bubble.
After that, I analyze the crash and the rising illiquidity problems concerning the banking sector and I describe the anatomy of MBS and CDO: two financial products at the root of the financial crisis. After the description of the main causes and triggering factors of the crisis. I focus my analysis on the way of transmission of the deepest and wider economic downturn till the days of Great Depression. In particular I examine in detail the transmission process between the two sides of Atlantic Ocean. Here I make a little preview on the situation in US and EU (a very accurate explanation follows in the next chapters) and then I try to discover essential features of the crisis spread from US to the European countries. In the following chapter I conduct a deeper analysis on the actions of the US and EU Governments to face the crisis. First of all, I consider the European intervention in the banking to solve liquidity and solvency problems of many European banks. Through this evaluation I try to give a sum of its possible costs. After that, I throw my attention to the European Recovery Plan and, in the end, I express my point of view on the matter. In the following part of the chapter I analyze the US responses to the crisis starting from the G.W Bush Economic Stimulus Act of 2008 till the latest Obama’s ARRA. At the same time I consider the US intervention in the banking sector, giving an estimated cost for this action. After this chapter I compare and contrast the current global crisis and the latest economic downturn in term of global dimension: the Great Depression. Here I write an introduction to the most important causes of the Great Depression, showing differences and analogies between the two global downturns, the world response in the 1929 and nowadays and what we had learned from the past crisis and who has been implementing in the actual anti-crisis action. In the last chapter I explain my point of view on the entire work, focusing on the countries intervention and criticizing some actions, taken into account by some Governments, and finally offering some different proposals, which, in my opinion, guarantee a better money allocation. In this last chapter I also analyze a huge problem that Europe has been showing off during this crisis, the coordination problem.