Development and Finance from issue 2009/2

Sándor Oroszi

A Descriptive Approach to the Current Crisis

- Abstract -

JEL E-32

Analyses of the development of the financial crisis generally highlight the role of banks that handle mortgages, and the profiteering and greediness of bankers. The bubble really expanded on the mortgage market, before bursting, but most of the ‘gas’ filling the balloon was generated elsewhere. The entire system was characterised by ‘overload’ and there have also been plenty of failings in the activities of institutions responsible for the safe operation of this system. The crisis therefore runs much deeper than the irregularities observed in mortgage provision – the causes are also rooted in the entire monetary sphere, in economic policy and in the inconsistency of the system of instruments employed. Financing resources have almost dried up for governmental demand stimulus programmes in Hungary. Most of the countries in our region are facing similar – almost insurmountable – difficulties in this respect, but also in their efforts to stabilise their own financial systems. Clearly, their resources are also very limited in this area. More than 80% of their banking systems are composed of subsidiaries of foreign-owned banks.

Sándor Oroszi, CSc, professor of economics (University of Pécs)

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