The euro crisis has been delayed for years instead of solved

European Central Bank

The world financial system has not become more secure, but more insecure.

(Photo: IMAGO/Jan Eifert)

In March 2012, Jaime Caruana, General Manager of the Bank for International Settlements (BIS), addressed a central bank meeting entitled “Central Bank Policy Before, During and After the Crisis”. Under the impact of the financial crisis, he emphasized how important it is for central banks and governments to do everything possible to combat a so-called balance sheet recession.

Richard Koo, chief economist at investment bank Nomura, coined the term balance sheet recession to describe the aftermath of the bursting of the stock and real estate bubble in Japan in the 1990s.

In short, it is about the fact that after a collapse in asset prices, companies and individuals no longer want to spend money because they are looking to reduce their excessive debt. As a result, without government support, the economy would plunge into depression.

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