Sergey Revyakin, Adviser to the president of the Institute of Economic Research of the Ministry of Economy and Budget Planning of the Republic of Kazakhstan (Astana, Kazakhstan)

The world financial crisis, which began with the collapse of the U.S. credit pyramid, is known to be the biggest crisis since the Great Depression.

The first signs of the crisis appeared in the U.S. mortgage market in 2006 (housing loans were not being repaid), and shortly afterwards this market collapsed, triggering a global liquidity crisis. Housing prices in the U.S. plummeted, investments in housing construction fell, and the liquidity of the mortgage derivatives market began to decline. All of this took place against the background of a jump in credit spreads in money markets; the stocks of international companies plunged, and stock indexes fell significantly due to the bankruptcy of major financial institutions, primarily investment banks.

Against the background of rising unemployment and tightening credit, the increase in U.S. consumer spending ceased in the second quarter of 2008 (for the first time since 1991).

In the third quarter of 2008, investors withdrew $20 billion from investment funds in developing countries for fear that the crisis might cause a recession in these countries.

The U.S. economys failure to cope with the escalating financial crisis was probably caused by the specific features of this economy:

(1) issue of dollars not backed by international reserves;

(2) issue of debt not backed by real assets (a gap between the financial and real sectors of the economy: pre-crisis world GDP stood at $64-65 trillion, while the value of all obligations, including cash and financial instruments, was about $500 trillion); this resulted in a bubble that was further inflated by factoring (sale of accounts receivable to third parties). As a result, the right to receive payment from borrowers became a separate and quite independent asset;

(3) organization of an unwarranted inflow of electronic money into the economy;

(4) rapid growth of U.S. external debt (its annual increase is comparable to half of U.S. GDP);

(5) use of dollars not backed by international reserves in the stock market;

(6) excessive financial liberalization; credit (mortgage) policy was beyond the governments control and, in effect, beyond the law (long period of low interest rates, low savings rate, highly speculative stock market, etc.);

(7) unjustified absence of strong government regulation of the financial market and industry (the U.S. insisted on the need to refrain from any kind of government intervention); the unfolding crisis only confirmed the concerns about the liberalization of the economy.

Kazakh economist A. Essentugelov associates the specific features of the American model with the transition of..........

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