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THE GLOBAL CRISES AND THE EXCHANGE RATE SYSTEMS

AGENGA OF THE CRISES1 • Subprime crises in the

USA and in GB

2 • Confindential crises

3 • Financial and liquidity crises

4 • Crises in the economies

5 • Business and social crises

6 • Now: To rethink the basic theories and economic laws

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2 CONFIDENCE AND OPTIMISM

3

3 Liquidity bubble

Per CentInterest Rates for the Euro Zone, the UK and the USA

Euro Zone Interest Rate United States Interest Rate United Kingdom Base RateSource: Reuters EcoWin

Jan03

May Sep Jan04

May Sep Jan05

May Sep Jan06

May Sep Jan07

May Sep Jan08

May Sep0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

5.5

6.0

Perce

nt

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

5.5

6.0

USA Interest Rates

Bank of England Rates

Euro Zone Interest Rates

Five of the highest paid and most powerful hedge fund managers, from left, George Soros, James Simons, John Paulson, Philip Falcone and Kenneth Griffin, blamed the current financial crisis on the ‘system itself’ when they testified before a US congressional committee hearing on hedge fund regulation 13-11-08

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6

Would you be willing to bet on roulette or a game of cards if you did not fully understand the workings of the game?Investors who lack a firm sense of valuation face just such a set of circumstances.

What do the numbers on a roulette wheel add up to?

THE CURRENT CRISIS 1: ED BALLS FEB 2008: “The reality is that this is becoming the most

serious global recession for, I’m sure, over 100 years, as it will turn out.”

He warned that events worldwide were moving at a “speed, pace and ferocity which none of us have seen before” and banks were losing cash on a “scale that nobody believed possible”.

“The economy is going to define our politics in this region and in Britain in the next year, the next five years, the next 10, and even the next 15 years,” said Balls. “These are seismic events that are going to change the political landscape. 7

THE CURRENT CRISIS 2: “the largest financial shock since the Great

Depression.” IMF.

The UK Financial Services Authority also gave a warning, but milder, that the recession “may be deeper and more prolonged than expected”, and added that the global financial system had “suffered its greatest crisis in more than 70 years”.

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THE CURRENT CRISIS 3: “We are facing hardships that come once in 100 years.”

Takanobu Ito, new head of Honda. 24-2-09 “The classic economic models and theories cannot be

applied, and future development cannot be foreseen.” Jean-Claude Trichet, ECB President. 23-2-09

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THE CURRENT CRISIS 4: “There is no doubt that we are living through the

greatest financial and economic crisis in living memory.”Jose Manuel Barroso: President of the European

Comission.

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POWER OF MONEY AND FINANCE: 20-2-09: Paul Volcker, at the same conference,

echoed Mr. Soros' sentiments, "I don't remember any time, maybe even in the Great Depression, when things went down quite so fast, quite so uniformly around the world."

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WOUTER BOS: DUTCH FINANCE MINISTER:

“For the first time in the post-world war two history we have a generation that seriously doubts whether the next generation is going to live better than themselves.

FT 12-3-09

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HUNGARY AND THE CRISIS Crisis inevitable: Open and small country Subprime crisis in the States in 2007

Response: o No estate baloon No toxic instruments

Result: ? 13

HUNGARY AND THE CRISES 2 Indebtness of the Hungarian citizens?

Under EU average In foreign currency

Dates of the crises: 1980’s 2002 2008

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HUNGARY AND THE CRISES AND THE EXCHANGE RATE

Two sides of change of Ft exchange rate:

Weakening Ft

1. Exporters?2. Foreign currency borrowers ? 15

The end?