| Based on the classic theories of the economic crisis, this paper aims to study the economic fundamentals and the financial market formation process of the crisis according to the characteristics of the 2008 global crisis.In the first chapter "the summary of the crisis theories and research map", we go through the classic theories of the crisis by the economic masters such as Fisher, Keynes, Minsky and Schumpeter. According to Minsky's thought that the capital development of a capitalist economy is accompanied by exchanges of present money for future money, and through applying some concepts from Taylor and O' Connell(1985) model, we construct Tobbin q and investment function, and introduce the current account balance as the key factor representing open economy. By constructing this model, we elaborate the business cycle and the positions in the cycle, of the three sub-systems such as the fundamentals of the crisis, the market formation process of the crisis and the impact of financial innovation on the crisis. This business cycle model serves as a guide map for the research of the paper.In the second chapter "the fundamental causes of the crisis:from the global economic imbalance to the global economic crisis", from the perspective of the "Schumpeter Long-Wave Technology Business Cycle Theory", we discovered that the fundamental cause for the global imbalance as well as the global crisis is the transition of "the fourth Schumpeter IT technology cycle" from "the boom period" to "the depression period", during which the world economy loses its "Schumpeter innovation engine" to sustain a rapid growth. Next, we use "the world AD-AS model" to analyze the mechanism of "booms created by imbalance", in which the global economic imbalance exchange structural imbalance for overall equilibrium. Last, from the perspective of the world economy, we study the ways, of the mechanism of "booms created by imbalance", to create asset bubbles through the accumulation of structural imbalance and to cause the sub-prime mortgage crisis, global inflation and unltimately the financial and eononomic crisis through the unwinding of the structural imbalance. Thereby, we discovered the dynamic evolution path from global economic imbalance to global economic crisis. In the third chapter "the financial market mechanism of crisis:the hypothesis of financial instability and the formation of the crisis, after a thorough retrospect of the attitudes towards "Economic Rational Person Hypothesis" and the thoughts about "Efficient Market Hypothesis" by major schools of economics from Adam. Smith to the Neoclassic Economic School, we expound that "the Efficient Market Hypothesis" contradicts "the Hypothesis of Financial Instability" and that "Rational Person Hypothesis" is the key to justify the former. Based on this analysis, "the Hypothesis of Financial Instability" is introduced. We find that the core of the hypothesis is to abandon the "Rational Person Hypothesis" and to carry forward Keynes'"Animal Spirit Hypothesis", which depends on the key variable of "Market Risk Appetite". Therefore, we model the dynamics of the market emotions, which causes the changes in the market risk appetite by what we call "the Folding Fan Model", and design an appropriate positive method to prove that model. The test result supports the Hypothesis of Financial Instability. At last, we indicate the relationship between the hypothesis and the crisis:what deprives "the stable situation" of "its stable supporter" is the expanding market risk appetite behind the long term stable situation and the irrational actions caused by it. When the asset bubble is too big to sustain itself (the acute unwinding of the global imbalance pressure), "the depression wave" caused by the burst of the bubble will lead to great destruction which can be expressed with the word of "crisis".In the forth chapter "the relationship between the financial innovation and the crisis: the accomplice or the killer, by induction and analysis, we uncovered "the Lever Amplification Effect" and "the Information Missing Effect" of the financial innovation. The former effect entitles the financial innovation to create additional liquidity while the latter effect blinds the market rationality. Thereby, the financial innovation prompts the financial instability process and assumes the player of an accomplice in the crisis.In the fifth chapter "The reflection on the crisis and policy reccommodation", we use the research findings to argue against the propositions such as "the manipulation of RMB exchange rate", "the global imbalance caused by global saving glut" and "the crisis caused by financial innovation". Last, we point out some options for the US. to fundamentally solve the problems of economic bubbling, and the concept of a second reform for China to thoroughly get out of the trap of the global economic imbalance and the global depression, and the thinking that only by cooperating tightly to avoid various means of trade protectionism, can the world economy as a whole go completely out of the depression. |
