About the Similarities and Common Roots of Two Consecutive Financial Crises

Abstract

During the process of identifying the causes of the crises emerging in economy we often come across simplified theories, that emphasize only one factor: whether it is the lack of integrity (unethical attitude), committing (accounting) irregularities, principal-agent problems, trust crisis, financial liberalization, the intensification of speculation, imbalance between personal interest and public interest, inappropriate incentive systems, short term orientation or similar issues. As a result of the complexity of our financial world, the occasionally occurring crises cannot be traced back to only one underlying cause; they are rather the indication of a systemic malfunction. This short summery study has the aim of presenting a systemic, multi-factor approach to the root causes of two financial crises emerging in the first decade of the 21st century, the so-called “Enron” phenomenon and the “credit market bubble”, also searching for the common roots of the two crises.

Keywords

• financial crisis
• short-term orientation
• integrity
• systemic deficiencies
• enronization