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What Went Wrong? Alternative interpretations of the global financial crisis


  • Jan Priewe


This paper first reviews different interpretations of the global financial crisis of 2008-2009 (and its aftermath), focusing on the proximate causes in the financial sector of the United States. However, behind the immedi-ate causes lie ultimate causes without which the crisis cannot be properly understood. These were mainly the global imbalances in trade and in cross-border capital flows, the systemic root of which lies in what the pa-per refers to as a “new Triffin dilemma†. This dilemma relates to the shortcomings of the present global currency system that uses the United States dollar as the key reserve currency, which has to serve both national and global objectives. Other ultimate causes are the trend towards a finance-driven capitalism in many OECD countries, most pronounced in the United States, and the trend towards greater income inequality, which dampens aggregate demand and contributes to financial instability as well as global imbalances. The confluence of the proximate and ultimate causes paved the way for the crisis.

Suggested Citation

  • Jan Priewe, 2010. "What Went Wrong? Alternative interpretations of the global financial crisis," Competence Centre on Money, Trade, Finance and Development 1002, Hochschule fuer Technik und Wirtschaft, Berlin.
  • Handle: RePEc:mtf:wpaper:1002

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    References listed on IDEAS

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    5. Obstfeld, Maurice, 2005. "America’s Deficit, the World’s Problem," Center for International and Development Economics Research, Working Paper Series qt7j3436bf, Center for International and Development Economics Research, Institute for Business and Economic Research, UC Berkeley.
    6. Till van Treeck, 2009. "The macroeconomics of "financialisation" and the deeper origins of the world economic crisis," IMK Working Paper 9-2009, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
    7. Markus K. Brunnermeier, 2009. "Deciphering the Liquidity and Credit Crunch 2007-2008," Journal of Economic Perspectives, American Economic Association, vol. 23(1), pages 77-100, Winter.
    8. World Bank, 2009. "World Development Indicators 2009," World Bank Publications, The World Bank, number 4367.
    9. Carbaugh Robert J & Hedrick David W, 2009. "Will the Dollar be Dethroned as the Main Reserve Currency?," Global Economy Journal, De Gruyter, vol. 9(3), pages 1-16, September.
    10. Günter Franke & Jan P. Krahnen, 2009. "Instabile Finanzmärkte," Perspektiven der Wirtschaftspolitik, Verein für Socialpolitik, vol. 10(4), pages 335-366, November.
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    12. Masazumi Hattori & Hyun Song Shin, 2009. "Yen Carry Trade and the Subprime Crisis," IMF Staff Papers, Palgrave Macmillan, vol. 56(2), pages 384-409, June.
    13. Lawrence H. Summers, 2000. "International Financial Crises: Causes, Prevention, and Cures," American Economic Review, American Economic Association, pages 1-16.
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