IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this article

On the Inevitability of Economic Crises in the Modern Market Economy

Listed author(s):
  • Burenin, Aleksey N.

    (Moscow State Institute of International Relations)

Registered author(s):

    This article examines the problem of the modern market economy crises. As part of the analysis, the author shows that an unlimited credit expansion stimulated by financial innovations and the natural desire of most people to improve their well-being periodically lead to debt overburdening of economy. Credit relations mediate the entire reproduction process and thus a violation in one of its links provokes negative consequences for the economy and inevitably leads to an economic crisis. At the beginning of an economic cycle, interest rates are low, and economic agents actively take loans. General optimism is supported by new loans. The situation changes when the economy approaches a boom phase. Credit chains take form of a real web permeating the entire economic organism. At the peak of the economic boom, the credit load reaches a critical level, a trigger is released, and a crisis begins. The function of the trigger belongs to the actions of economic agents in the market where the financial bubble was formed. In previous economic systems, credit was limited to a relatively narrow framework, so that a new pattern of economic functioning that inevitably leads to crises could form on its basis. Only capitalism, with its innovative nature, opens access to credit for almost any household and firm. Credit has creative power because in a short time it allows to get the necessary resources to finance large-scale projects, but it creates a threat to economic stability in the country if it reaches a very large scale. Our analysis brings us to a conclusion that it is impossible to solve the problem of crises, because capitalism makes maximal use of loans as a means of stimulating household consumption and financial innovations provide manifold possibilities for this on an ever-increasing scale.

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

    File URL: ftp://w82.ranepa.ru/rnp/ecopol/ep1751.pdf
    Download Restriction: no

    Article provided by Russian Presidential Academy of National Economy and Public Administration in its journal Economic Policy.

    Volume (Year): 5 (2017)
    Issue (Month): (October)
    Pages: 8-21

    as
    in new window

    Handle: RePEc:rnp:ecopol:ep1751
    Contact details of provider: Postal:
    82, Vernadsky pr., 117571, Moscow

    Phone: +7 (499) 956 95 86
    Fax: (095) 564-85-80
    Web page: http://www.rane.ru/
    Email:


    More information through EDIRC

    No references listed on IDEAS
    You can help add them by filling out this form.

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:rnp:ecopol:ep1751. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (RANEPA maintainer)

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.