The Study On Formation Mechanism Of The Financial Crisis

From the context of the development of economic theory, financial crisis has been oftentriggered a fierce debate on the existing economic theory and economic policy. While, thedestiny of priori theory may be fiercely criticized, or may be improved, even may besubstituted by a new theoretical analysis framework. The2008financial crisis provides ussuch an opportunity.The theoretical explanation of the financial crisis is isolated, from the earlydebt-deflation theory, the expectation theory, the financial instability theory, to the latest assetprice bubble theory or the four generations financial crisis models, even recently a widevariety of theories about the cause of the financial crisis, lacking a general and systematictheoretical explanation of the formation mechanism of the financial crisis. In order to seek thesystematic theoretical explanation of the formation mechanism of the financial crisis, thisarticle try to re-interpret Keynesian macroeconomic theory and expectation theory inaccounting perspective, to in depth explore the endogenous financial instability in marketeconomic. In this process, we proposed Accounting Plane Model as the macroeconomicobservation tools, and introduced micro-enterprises fragile balance sheet structure in theanalysis of the formation mechanism of the financial crisis, which could be regarded as aninnovation.The main content is organized as follows: First, we combed and commented on thecurrent financial crisis literatures. Based on this, we clarified the theoretical basis of thisarticle, and build Accounting Plane Model with the four departments of the macroeconomicusing Keynesian macroeconomic theory. Followed, we defined the concept and the types offinancial crisis, meanwhile reviewed significant financial crisis in the recent period inhistorical perspective, in order to excavate the common characteristics behind the differenttypes and different periods of the financial crisis. Third, we study the distinction between thevirtual economy and the real economy in pricing mechanism and profits constitute aspectsduring the investment process. Based on this, we proved that virtual economy appearedendogenous financial instability. While, asset price volatility, credit expansion, pro-cyclicaleffect of macroeconomic jointly leaded to the formation of the financial crisis. In addition, wemade micro-level theoretical explanation of the above factors in the formation process ofthe financial crisis. We further study on the cause, way and evolution of the formation of theglobal financial crisis. Fourth, we take an empirical test to credit expansion and asset pricevolatility in the formation process of the financial crisis, by the way, we analyzed the impacteffect of non-monetary factors on output in the financial crisis. Then we in-depth explored theaction of the stock market on the formation of global financial crisis. Finally, according to theformation mechanism of the financial crisis we raised policy suggestions for preventingfinancial crisis in the aspects of transforming government policy goals, reforming thefinancial system and counter-cyclical regulatory policy.The study has shown that, structural imbalance between the virtual economy and realeconomy, and virtual economy endogenous instability was the root reason for the financial crisis. The implementation of market economic system could cause the trend of socialpolarization and savings glut under competition mechanism, and the proportion of speculativecapital could be raised. Financial leverage caused asset price bubble. Credit expansion causedby accommodative monetary policy and financial innovation further propelled the asset pricebubble, and the pro-cyclical effects covered up systemic financing risks. In this evolution, thecompany’s capital structure evolved from hedge finance into speculative finance or ponzifinance. Ultimately, any random bad news could lead to the collapse of the financial system.While the accommodative monetary policy and financial liberalization in the pre-crisis couldbe deep-level reason for credit expansion; and subsequent asset price volatility caused bycredit expansion is the direct incentive for systemic banking crisis. Non-monetary factorssuch as panic had significant impact in the formation process of the financial crisis, and thecountry-level capital market linkage could make a single country’s financial crisis into aglobal financial crisis. Virtual economic turn out to be endogenous financial instability, andfamilies, businesses and the financial sector were "players", Therefore the role of preventionand response to the financial crisis could only be played by the government departments. Thegovernment could prevent the formation of financial crisis through the legal, institutional orpolicy approaches.We try to develop and improve of the financial crisis theory in accounting perspective, toprovide a more general theory to explain the formation mechanism of the financial crisis. Inpractice, the study provides theoretical guidance and practical reference for government toanalyze, prevent and solve the financial crisis.