IS0902 - Systemic Risks, Financial Crises and Credit - the roots, dynamics and consequences of the Subprime Crisis

The main objective of the Action is to provide comprehensive documentation and state of the art analysis of the current Subprime Crisis and its consequences. What started as a burst of a speculation bubble in the US real estate market has developed into the most severe financial crisis since the Great Depression. Characteristic of the Subprime Crisis was the tight connection between the American real estate credit market and the structures and processes of global markets. The slicing and dicing of subprime was made possible by modern financial instruments like derivates, modern practices like securitization, and new actors like Credit Rating Agencies who provided first class ratings and thereby suggested what turned out to be false security, and Hedge funds that generated demand. The crisis is therefore as much a crisis of the modern capitalist system as it is of finance. It has led to greater transformation of the American and European financial markets than any planned reform. Discursively, the crisis has challenged core ideas of monetarism and led to a revival of Keynesian monetary and fiscal policies. This interdisciplinary Action critically assesses sources, dynamics and consequences of the global financial crisis. It aims to develop a completely new approach to financial stability, reach a better understanding of financial crises in general, and formulate specific policy goals to make financial markets more secure.