Deregulation of the Financial Markets as the Cause of Their Crisis

The financial market reforms following the depression in the 1930ies and the reorganisation of the international financial system in Bretton Woods in 1944 formed the basis for a market economy with highly regulated financial markets that established itself in the West after World War II. The instability of the exchange rate regime due to the asymmetric role of the dollar led to the collapse of this regulatory framework. Strong exchange rate fluctuations followed oil price shocks, which triggered a high-interest policy that undermined the regulation of the financial markets in the USA and UK. The demand-oriented economic policy damaged by the oil price crisis was also replaced by a neoliberal doctrine that theoretically underpinned the deregulation process. The pressure on protected financial services and their profitability, which accompanied their competitive character, generated a wave of mergers in the financial sector and enabled the resulting financial conglomerates to carry out increasingly risky transactions that were closely interlinked with deposit and lending business. This mixture, which recalls the origins of the financial market crisis of 1929, was finally ignited by the real estate price boom in the USA and led to the financial market crisis of 2007-08.