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Kokorev K.V.
Orel State Technical University, Russian Federation
Influence of financial bubbles on States
of the world.
Economics
is the social science that analyzes the production, distribution, and
consumption of goods and services.
In
Western countries markets are to allocate resources and a free market economy
has no government intervention in economic space of countries. But nowadays the
disruptions in the modern economic system especially in the West positions rely
on the special government interference.
During
the period of 2008-2012 years many countries experienced not previously studied
shifts in economy. And many researchers are concerned this problem. Today
economists’ recommendations have high value to governments. And they especially
rely on them now.
Humanity
stands on the stage of the collapse of the monetary system. People don’t
understand the specific of the forming economic bubble, energy crisis, inflation
and etc.
Countries
across the continent are struggling to find ways to cope with the growing
financial crisis. From the nationalization of domestic banks to multi-billion
cash injections into the capital markets, Europe's politicians, regulators, and
market players are trying different approaches to deal with the mounting
problems.
The special
role plays the term «bubble». The bubbles have a tendency of accumulation. In
conclusion, the bubbles are burst and collapse occurs.
While
many explanations have been suggested of economists, it has been recently shown
that bubbles appear even without uncertainty, speculation or bounded
rationality.
Economic
bubbles occur when too much money is chasing too few assets, causing both good
assets and bad assets to appreciate excessively beyond their fundamentals to an
unsustainable level.
USA is
example of this. That is, the central economic problem of USA is a discord
between U.S. government’s (and the desire of U.S. citizens) unlimited demands
with ability of nation to produce goods and services.
While
there is no clear agreement on what causes bubbles, there is evidence to
suggest that they are not caused by bounded rationality or assumptions about
the irrationality of others, as assumed by greater fool theory.
The
main cause of economic bubbles is the excitement of the Central Bank and government
inattentive.
Also bubbles
as related to inflation and thus believe that the causes of inflation are also
the causes of bubbles. This is topic of
bubbles which assert that bubbles come from particular «critical» states in the
market based on the communication of economic factors.
If the
country choice dishonest position is itself a deception, it can combine
criteria of economy of its reserves’ leveraging positions with publicly
unavailable information on their stock holdings, and strategically shield or
pass over in silence them to default.
However,
this is a major mistake! Country dooms itself to debt and crisis if it hides
the reality of situation.
As for example,
we can say about Greece. Greece enjoyed a high standard of living and very high
Human Development Index, ranked 29th in the world in 2011.
The
country concealed important factors which influenced the development of the
country. Therefore, Greece has an unstable. Greece is splintering politically
ahead of national elections, raising the risk that it won't be able to make the
economic sacrifices still needed to keep this situation.
Greece
is a bankrupt that is untenable, and other countries use it. The relative
fussiness on financial markets have displayed in the face of the growing
likelihood of a default seems to hint at a certain level of preparedness among
investors.
Now
Greece is making lease and sale easier for the countries and famous people to
fulfill their dreams by preparing to sell, or offering long-term leases on,
some of its 6,000 sun kissed islands in a desperate attempt to repay its crazy debts.
Many buyers
are willing to inject capital and developing a luxury complex of tourism. Potential
investors also looking at property on the island of Rhodes are mostly Russian
and Chinese.
Greece
has embarked on the desperate measures following a decade of overspending and
after jittery investors raised borrowing costs to unbearable levels.
The
sale of an island (state territory) is a convincing a member of the
international jet-set to take on a long-term lease that would help to boost its
coffers.
World
investors are interested in the Greek system of crisis, as they already control
some categories of this country.
In the
midst of the crisis strikes almost
paralyzed the country and hedge funds bet against the economy.
Thus, it
is often difficult to observe internal and external challenges in real-life
markets. The bubbles are often conclusively identified only in retrospect, when
a sudden drop in prices appears. Such a drop is known as a crash or a burst of bubble.
Both the boom and the burst phases of the bubble are examples of a positive
feedback mechanism as in Greece. In contrast to the negative feedback mechanism
that determines the equilibrium price under normal market circumstances economists do not look at the
quantity of means and purchase goods illegally. Prices in an economic bubble
can fluctuate erratically, and become impossible to predict from supply and
demand alone.
The bibliography:
1. http://www.greekcrisis.net/
2. http://en.wikipedia.org/wiki/Economic_bubble
4. http://www.guardian.co.uk/world/2010/jun/24/greece-islands-sale-save-economy