Rudiger von Rosen, head of Deutsches Akieninstitut e.V., a German think tank, said the economic turbulence being experienced in the United States points to how enmeshed global financial markets are today.
What started in a small segment of the U.S. housing market, spread to securitized products and credit and led to a near complete lock up of the interbank credit market, von Rosen said during a seminar Oct. 23 at Iona College”™s Hagan School of Business.
Von Rosen, who found the stock market in Vietnam and was the first chairman of the DAX German stock market index, spoke about the implications and lessons learned from the international financial crisis.
“The massive loss of confidence, which is due to the enormous complexity of global financial transactions, the risks previously taken and the lack of transparency regarding those risks, exacerbated the de-leveraging process within the financial industry,” von Rosen said.
The process included a decline in share prices, rapid increases in costs of funding and depressed asset prices.
“There will be effects on the real economy and in turn the financial institutions again will be affected,” von Rosen said.
Governments around the world decided to step in on a large scale, he said, but nationalization should be understood as an interim measure to rebuild confidence.
He advised investors to keep their money in the market, but be cautious to expect the market to be more risk sensitive in the future.
