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Asset Bubbles, Debt Deflation, and Global Imbalances

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  • Robert Guttmann
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    Abstract

    The article investigates the primary imbalances in our global economy, which have brought us to the brink of depression. Putting the emphasis on structural changes in our credit system following its deregulation in the 1980s, we can conclude that the confluence of financial innovation and financial globalization created a new propensity for speculative asset bubbles. When the latest bubble burst in 2007, it triggered a devastating sequence of financial instability which has driven the world economy into the worst downturn since the 1930s. Government crisis-management responses, from deficit spending to unorthodox monetary policy and bank rescues, are assessed. The global dimension of this crisis requires international policy coordination, a task made more difficult by the asymmetry of our dollar-based international monetary system encouraging excessive US deficits.

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    Bibliographic Info

    Article provided by M.E. Sharpe, Inc. in its journal International Journal of Political Economy.

    Volume (Year): 38 (2009)
    Issue (Month): 2 (July)
    Pages: 46-69

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    Handle: RePEc:mes:ijpoec:v:38:y:2009:i:2:p:46-69

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    Web page: http://mesharpe.metapress.com/link.asp?target=journal&id=110909

    Related research

    Keywords: Deflation; financial groups; financial instability; global policy coordination; international monetary system; securitization; speculation;

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    Cited by:
    1. Eckhard Hein, 2012. "Finance-dominated capitalism, re-distribution, household debt and financial fragility in a Kaleckian distribution and growth model," PSL Quarterly Review, Economia civile, vol. 65(260), pages 11-51.
    2. Hein, Eckhard & Truger, Achim, 2010. "Finance-dominated capitalism in crisis – the case for a Global Keynesian New Deal," MPRA Paper 21175, University Library of Munich, Germany.
    3. Hein, Eckhard, 2011. "Distribution, 'financialisation' and the financial and economic crisis: Implications for post-crisis economic policies," IPE Working Papers 09/2011, Berlin School of Economics and Law, Institute for International Political Economy (IPE).
    4. Eckhard Hein, 2013. "Finance-dominated Capitalism and Redistribution of Income: A Kaleckian Perspective," Economics Working Paper Archive wp_746, Levy Economics Institute.

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