Understanding Crises and Recessions

Abstract

To understand the essence of a crisis or depression, as a basically monetary phenomenon, is necessary. If the crisis has been the result of a credit expansion then proposing credit expansion as a cure, would be an absurd idea. Indeed, the 2008 crisis resulted from an unprecedented expansion in the housing market in the US but it was transmitted to Europe only because credit was already loose, given tight monetary policies. Indeed, European and US investment and inventories were huge just before 2008 (and for the whole period 2000–2008), the same was also the case in Greece, and Greece in particular experienced and unprecedented expansion of credit on all fronts (household, business, etc.).