Original scientific paper

Structural Imbalances and Financial Crises Proliferation

Kristijan Kotarski orcid.org/0000-0001-9500-6760 ; Faculty of Political Science, University of Zagreb, Zagreb, Croatia

Abstract

This article deals with fundamental concepts that are the prime cause of financial
crises proliferation such as fractional reserve banking system, overleveraging
and structural imbalances created in such a fashion. It examines these
issues in a completely new manner shedding the light on their alternative interpretation
which contrasts conventional wisdom. Unchecked money supply
is characterized as the main problem that causes overleveraging, which in turn
reinforces property bubbles. The pattern of economic growth that is heavily
dependant on rising debt is completely unsustainable. Inflation and increased
taxes in order to serve public debt obligations under the privately-owned fractional
reserve banking system are not only its by-products but also its vital
components. The very logic of the compound interest problem causes spiraling
debt, which cannot be supported by constant economic growth that is limited
against the finite nature of Earth’s natural resources. Pending reform of
the present monetary system is key to the solution of most contentious issues
in the global economy.

Keywords

structural imbalances; fractional reserve banking system; financial leverage; financial sector; financial crises; sustainable economic growth

Hrčak ID:

50930

URI

https://hrcak.srce.hr/50930

Publication date:

12.3.2010.

Article data in other languages: croatian

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