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Avoiding and preventing financial crises

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  1. Introduction
  2. The formation of speculative bubbles
    1. The phase of euphoria
    2. A period of easy credit
  3. The deregulation of financial markets
    1. Example
    2. The sources of information
  4. Preventing the recurrence of crises through financial supervision
    1. The supervision of financial players
    2. Restraining the financial markets
  5. The reform proposals
  6. Conclusion

Better safe than sorry is an old adage that few can argue with. Rather than suffer the disastrous consequences of financial crises, it would be better to prevent their occurrence, thus preventing the formation of bubbles and slowing their spread. Schumpeter considered the economy as a cyclical process of "creative destruction", where crises are defined as the turning phase of growth that has reached its climax.

[...] Preventing the recurrence of crises through financial supervision of state actors and markets remains possible, but it implies a substantial improvement in international financial governance Preventing financial crises and mitigating their effects requires state regulatory action on both the financial players and on the financial markets The state must strengthen supervision of financial players through a stricter regulation. Ensuring the solvency of banks by strengthening prudential regulation: Cooke ratios and McDonough existed before the 2008 crisis, but they were bypassed by securitization. [...]

[...] Each member state has its own body, (AMF in France), sometimes differentiated by sector (in France CAPA oversees insurance). A regulation that applies in a strictly national framework thus has flaws. Implementation of the Lamfalussy committees and three supervisors: This system remains very complex and tends to be more integrated. Such a system also brings a loss of sovereignty of the Member States. To take a pessimistic view, preventing the recurrence of crises in the operation of the financial system is impossible. In most states they can, like Sisyphus, struggle to cushion the effects before a new [...]

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