Title: Ain’t no Sunshine When the
Boom is Gone: Questioning the Roots of Current Global Financial Crisis
Abstract: Imagine
someone would have told you two years ago that mid September 2008
unrivalled stars of Wall Street and international financial markets are
wondering where the boom is gone, after enjoying years of bright
sunshine in financial markets. During the last weeks the ongoing
financial turmoil has created a climate of fear, leaving financial
intermediaries feeling that it is not warm anymore as the boom is away.
Indeed international investors seek shelter - as the boom is gone - and
the current global financial gale leaves darkness on global financial
markets. We guess that not only your answer, but also the reactions of
most analysts from Tokyo to New York – including Nobel laureate Paul
Krugman - would have been something like: “I have got a good gut
feeling that you are insane”. Such analysts would most probably have
advised you to stop panicking and instead immediately to frequent your
psychiatrist. Ironically, exactly the same analysts now may have a
strange gut feeling and are seemingly in trouble to explain reasons for
the sudden storm on international financial markets. In the meantime,
above New York, Frankfurt and Tokyo central bankers are steering
helicopters with billions of Dollars, Euros and Yen with hardly any
substantial result yet. In addition policy makers around the globe are
trying to deliver relief by virtually flooding the war chest of
panicking financial intermediaries and by promising to keep them going
in any case. However, in this situation a deep drag off the printing
press does not seem to still the thirst for liquidity in financial
markets. At this stage most analysts and policy makers, including the
ones with distinguished gut feelings, cannot get on grips with
their animal spirits and are longing for a ray of financial sunlight.
Authors: Andreas
Kern and Christian Fahrholz