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Keynes, the British economist, says the state should intervene in the economy: infrastructure needs to be developed, public works have to be organized and social politics are to be improved. If all of the above are achieved, there is a chance of keeping the economy in balance in a time of crisis. In the Great Depression of 1929-1933 Roosevelt's New Deal programme helped the United States to recover from the crisis, conduced to preserve civil democracy and laid the foundations of the welfare state. The so-called sub-prime crisis that began at the end of 2006 represents the culmination of a super boom that started more than 25-years ago. The variable intensity financial crisis originating from the real estate and banking sectors resulted in the decline of the U.S. economy; its slowing economic growth has an impact on the whole world's economy. Therefore, the question is whether there is any way out of the current global economic crisis, like 80 years ago.

This paper discusses the global financial crisis of 2008/9 in thirteen countries, the ten new EU members that previously were communist and the three countries of Western former Soviet Union. Their problems were excessive current account deficits and private foreign debt, currency mismatches, and high inflation, while public finances were in good shape. The dominant cause was fixed exchange rates. Many lessons can be drawn from this crisis. A dollar peg makes no sense in this part of the world. The five currency boards in the region have lacked credibility. By contrast, inflation targeting has worked eminently. The euro has proven credible both in the countries that officially adopted it and in the countries that adopted it unilaterally. With the exception of Hungary, all the countries in the region have displayed decent fiscal policies. No government should accept large domestic loans in foreign currency and they can be regulated away. The IMF has successfully returned to the original Washington consensus with relatively few conditions: a reasonable budget balance and a realistic exchange rate policy, while focusing more on bank restructuring. The most controversial issue is the role of the ECB. The ECB should facilitate the accession of willing EU members to the euro by relaxing the ERM II conditions.

"Conventional wisdom held that housing prices couldn't fall. But the spectacular boom and bust of the housing market during the first decade of the twenty-first century and millions of foreclosed homeowners have made it clear that housing is no different from any other asset in its ability to climb and crash. Housing and the Financial Crisis looks at what happened to prices and construction both during and after the housing boom in different parts of the American housing market, accounting for why certain areas experienced less volatility than others. It then examines the causes of the boom and bust, including the availability of credit, the perceived risk reduction due to the securitization of mortgages, and the increase in lending from foreign sources. Finally, it examines a range of policies that might address some of the sources of recent instability."--Provided by publisher.

In 2008 financial crisis, stock market turned highly volatile while U.S. government had proposed a series of policies rescuing the economy. This study examines convergence to market efficiency from government financial policies. We find a significant impact of contemporaneous order imbalance on return, while the relation between return and lagged imbalances is insignificant, implying that lagged order imbalances have no predictability on return. From a time-varying GARCH model, we find that explaining power of order imbalance on return declining, implying that volatility plays an important role in return-order imbalance relation. We take a further step to find that there is no strong direct relationship between order imbalances and stock volatility. The story casts on market maker behaviors. Market makers accommodate high inventory levels to mitigate stock volatility on financial policies announcements. An imbalance based trading strategy we develop fails to beat the market. It supports financial policy announcement efficiency.