Group items tagged

As banks continue to fail, there is a renewed interest in understanding the causes of financial crisis. Economists have for long tried to understand what causes such crises. There are two views on this: (a) a "sunsopt" view, and (b) a "business cycle" view. The sunspot view argues that the root cause of crisis is depositor "panic". When a substantial number of depositors of a bank begin to believe that a bank is not solvent, they end up starting a self-fulfilling bank run. Given the first-come first-serve nature of demand deposit contracts, every depositor wants to stand first in the line to withdraw his money from the bank. This collective action puts a pressure on even an otherwise solvent bank and drives it to bankruptcy. The business cycle based view instead focuses on fundamental weaknesses in the economy as the key force behind a banking crisis. Under this view, economists argue that banks fail because their illiquid risky investments turn out to be bad. Depositors realize this problem and therefore demand their money back. This leads to an "inefficient" liquidation of the bank and its ultimate failure. While these two views share several common feature, there are many differences in their policy prescriptions. Under the sunspot view, the regulator should try hard to avoid a self-fulfilling prophecy. Regulations such as deposit insurance from the government are geared precisely toward avoiding such runs. Under the business cycle based view, the regulators need to focus their attention more closely on avoiding risky bank behavior and in ensuring smooth liquidation of distressed bank's assets. Of course, a prudent bank regulator should use elements of both these theories to design an optimal bank regulation policy.

With the recent economic crisis, most people have learned the importance of emergency funds. Unless you have a good amount of money saved in your, you won't be able to go past a financial crisis.

With the recent economic crisis, most people have learned the importance of emergency funds. Unless you have a good amount of money saved in your, you won't be able to go past a financial crisis.

Timizzer Oil and Gas News: $468mln into US LNG, India resists US pressure, Shale resolves UK energy crisis 08/05/2012 by Timizzer

Is Obama using the BP oil crisis?

James Fox : BP Oil Spill Crisis

Jim Rogers The Currency crisis will get worse

Webster Tarpley World Crisis Radio 6-12-2010

Lindsey Williams on The Gulf Oil Crisis - Coast to Coast AM 13 June 2010

This is not just a Crisis it is the Decline of Empire America

Nassim Taleb : The Crisis may have just Started

BP Oil Spill crisis a wake-up call for energy industry says Medvedev

Commercial Real Foreclosures Crisis

Peter Schiff we will survive the crisis not the Government cure

Gerald Celente on the Greek Debt Crisis interview with Helen Skopis of Athens, Greece

Gerald Celente : There is going to be a Currency Crisis and a Terrorist attack

Oil Rich Venezuela hit by power crisis

The fiscal crisis - Peter Schiff on Freedomain Radio

UNDERSTANDING THE FINANCIAL CRISIS

Ron Paul warns of a Currency Crisis in America

Peter Schiff : The Housing Crisis - Goldseek Radio 01 May 2010