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## Über dieses Buch

Through the tools of economics, Annunziata's vivid and gripping book shows how the global financial crisis was caused by a failure of leadership and common sense in which we all played a role. The insights of this clear and compelling analysis are essential for learning the right lessons from the crisis, and seeing new threats around the corner.

## Inhaltsverzeichnis

### Chapter 1. Introduction

From Hubris to Humble Pie
Abstract
In 2007 global financial markets began to suffer an unprecedented succession of disruptions, breakdowns and conflagrations that nearly broke the back of the world economy. The damage was so deep and so severe that the crisis mutated like a virus as it infected different parts of the global financial system. While at this writing its intensity has gradually diminished, periodic flare-ups have served as stark warnings that its harmful potential is not yet fully under control. In fact, the crisis has morphed so often that it has proved impossible to identify it by a single moniker, as was the case for the “dot-com” crash or the Long-Term Capital Management (LTCM) crisis. The definition of “subprime- crisis, which seemed to fit perfectly at first, now sounds misleadingly diminutive as disruptions have spread like wildfire to a much wider range of asset markets, including sovereign bond markets in the Eurozone. And it is not over yet.
Marco Annunziata

### Chapter 2. How Did We Get There?

Abstract
In hindsight, it is all too obvious that the Great Modération was in fact a “Great Delusion”; however, even with the benefit of hindsight, we have not yet reached a consensus on how we got ourselves into such a huge mess, and on whether and how it might have been avoided. One thing that seems clear is that the Great Moderation had sown the seeds of its own self-destruction. The combination of low inflation, low interest rates, low volatility and high leverage gave the illusion that risk had been eliminated and set the stage for yield hunting via financial engineering. There are two main competing theories as to how these conditions were created: by the Fed or by globalization.
Marco Annunziata

### Chapter 3. The Earthquake

Abstract
In retrospect, everything always seems clear. But that does not help us at all. At the beginning, and in the midst of the next crisis, we will not have the same information as at the end. The best training techniques always try to simulate “real-life” conditions, the circumstances we actually encounter in the battlefield, on the playing field, in outer space. It is useful therefore to rewind the tape and relive the crisis, to see how we went through each key step, why we took the right or the wrong decisions. It is the best, perhaps the only, way to learn more about the process, about the way in which we are going to react the next time around – whether we are ordinary citizens, business leaders, or policymakers.
Marco Annunziata

### Chapter 4. Asia Fuels Hopes and Fears

Abstract
The Fed’s aggressive moves opened a rather long period of deceptive calm in which the global economy appeared resilient with regard to the crisis. It was the calm in the eye of the storm. The U.S. economy was losing steam, but in a way which seemed broadly in line with a normal cyclical slowdown, albeit with downside risks from the stress in the banking sector and the corresponding threat that the credit supply would be constrained. As we saw above, even the Fed considered a recession as a risk, not a foregone conclusion. European growth remained healthy, at least by the moderate standards of recent European history; the Eurozone was poised to grow faster than the United States for the second year in a row, posting real GDP growth of 2.8 percent for the full year 2007, well ahead of the U.S.’s relatively meager 2.1 percent. And, most importantly, Asia continued to enjoy extremely robust growth, with China leading the charge. By the end of the year, the region.’s growth would clock in at a record 10.6 percent, with China at a breath-taking 13.0 percent and India at 9.3 percent.
Marco Annunziata

### Chapter 5. No Man Is an Island

International Policy Coordination – Accident or Design?
Abstract
And therefore never send to know / for whom the bell tolls; / it tolls for thee.1 One of the clearest lessons of the crisis is that the global economy is much more closely interconnected than it used to be, and it is becoming ever more so. This is not news: Thomas Friedman made the point quite effectively in his 2005 best-selling book The World is Flat; but the financial crisis brought home to all of us what this lesson really means. Global financial markets are so intimately linked by a complex web of transactions that tensions in one country or asset market can have repercussions which are both powerful and nearly impossible to predict across countries and asset markets. And the global economy is so interconnected that growth trends and policy actions in some countries can have potent and unexpected reverberations on economic activity and macroeconomic stability across the globe.
Marco Annunziata

### Chapter 6. Europe’s Hubris

Abstract
I lived through most of this financial and economic crisis in Europe while on a trading floor in London and shuttling to and from a number of European cities on regular visits to investors and policymakers. One thing that struck me and worried me from the very early stages of the crisis was the surprising degree of hubris displayed by Europeans, and especially European policymakers; as I wrote in a Wall Street Journal Europe article in January 2008: The sudden collapse in global equity markets early this week shook investors and pushed the Fed into an emergency intermeeting cut in the Federal Reserve’s funds rate.
Marco Annunziata

### Chapter 7. Deflation, Quantitative Easing, and the Money Multiplier

Abstract
As the global economy plunged into recession, oil prices came back to earth with a loud thud: the international price of crude Brent oil plum- meted to $34 per barrel by the end of 2008 from its peak of$145 in early July of the same year, a 75 percent fall in the space of six months. Most commodity prices followed a similar downward trend. And just as their seemingly unstoppable surge had pushed headline inflation rates up, so their sudden collapse would now push inflation rates lower. Meanwhile, as a number of economies across the globe plunged into recession, it became clear that the decline would not be limited to the notoriously volatile energy prices, but would also affect the more stable “core” prices. The recession would bring higher unemployment and therefore weaker consumer demand, reducing both the pricing power of firms and wage growth.
Marco Annunziata

### Chapter 8. Has Capitalism Failed?

Abstract
The financial crisis has been a truly seismic event: it has inflicted lasting damage on the structural foundations of the global economic and financial systems, wiped out a couple of good years’ gains in real GDP for advanced countries, and has suddenly changed – for the worse – the lives of millions of people. It hit us when we were completely unprepared, lulled by the false sense of comfort and security of the Great Moderation. And, coming as a shock, it has shaken our confidence in a profound way, undermining our very view of the world. The reaction has been commensurately strong and complex, a typical response to unexpected catastrophic events: the rush to identify scapegoats on whom to pin the blame for the disaster, and the interpretation of the catastrophe as the inevitable retribution for a lapse in morality, like the Flood punishing a sinning mankind. I will come back to these two reactions in the next chapter, because of the influence they can have on the policy decisions that will shape the post-crisis world. Here, I want to briefly discuss a third aspect of the reaction, namely the sudden loss of confidence in capitalism as the best available way to organize our economies. At the time of the crisis, many politicians and commentators proclaimed, in more or less nuanced ways, the death of capitalism. Has capitalism failed, just as communism did?
Marco Annunziata

### Chapter 9. Scapegoating and Ethics

Abstract
Let me be clear up-front: the private financial sector, where I have worked for ten years, bears the largest share of responsibility for the crisis: it is the financial sector that granted the subprime mortgages to people who could only afford them as long as the Ponzi scheme in the housing market continued; it is the financial sector that created the unprecedented levels of leverage that fuelled credit growth and asset bubbles; and it is the financial sector that devised the incomprehensibly complex structured products that hid the risk and eventually left the whole system paralyzed in a thick fog of uncertainty. This chapter is not an attempt to exculpate the financial sector. Rather, it is aimed at discussing whether scapegoating the financial sector (or any other single set of actors for that matter) makes the overall policy response to the crisis more or less effective.
Marco Annunziata

### Chapter 10. The Eurozone’s Existential Challenge

Abstract
The financial crisis became the moment of truth for a very momentous and ambitious experiment: the Eurozone. As we saw in Chapter 4, European policymakers initially looked at the subprime crisis with a certain degree of detachment, at times even a dose of smug satisfaction. They regarded it as a U.S. crisis, which would expose the underlying and underestimated weakness of the American growth model while vindicating the sustainability and superiority of the European one. Then Europe suffered a deeper recession than the United States, and the European financial sector proved to be as exposed and fragile as its cross-Atlantic counterpart, providing a healthy lesson in humility. But as it turned out, this was not the end of the story; far from it. The financial crisis would prove to be a veritable existential challenge to the Eurozone.
Marco Annunziata

### Chapter 11. Exit

Abstract
By mid-2011, the global financial crisis was over three years old, and we were not out of it yet. The global recession is over, but the crisis is not. We are not sure how quickly we will go back to normal, and perhaps we do not have a good enough sense of what “normal” is anymore. Paradoxically, for economies already considered ‘mature’, the crisis has been like that point in everyone’s life when we suddenly sense our own mortality, we no longer feel invincible, and we become painfully aware of how fragile our body is. In a similar way, the financial crisis has shattered the confidence of advanced economies, leaving them with a hypochondriac-like fear of collapsing again.
Marco Annunziata

### Chapter 12. Conclusion

Abstract
The international financial and economic crisis which erupted in 2007 will be one of the defining moments of the twenty-first century. It has shaken confidence in prevailing economic models and given a sudden dramatic acceleration to profound and ongoing transformations in the global economy. The ambitions of the financial sector have been cut down to size, forcing it to operate under a cloud of suspicion and with a new, heavier regulatory burden. And the secular shift in the balance of economic (and geopolitical) power towards emerging markets has taken a giant leap forward.
Marco Annunziata

### Backmatter

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