LIST OF TABLES AND GRAPHS LIST OF ABBREVIATIONS INTRODUCTION 1. ABOUT THE WRITING AND PURPOSE OF THE BOOK... 20

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1 C O N T E N T LIST OF TABLES AND GRAPHS LIST OF ABBREVIATIONS Preface Acknowledgements INTRODUCTION 1. ABOUT THE WRITING AND PURPOSE OF THE BOOK THE CURRENT ECONOMIC SITUATION AND THE SHORT TERM FORECAST The depth of the current crisis The current global crisis and forecasts Downward corrections of the forecasts The crisis in the Western Balkan region and Montenegro Calculation results The misery index The economic situation index WHY IS THE TRUTH ABOUT THE CRISIS KEPT SECRET? Part I: FRAMEWORK 1. WHY DIFFERENT ANSWERS TO ECONOMIC QUESTIONS? Presentation of the problem A leap into history the creation and development of economic science The development of scientific cognition in economic science The historical development of economic science... 54

2 Pre-scientific phase The problems in the emergence of economic science The current status of economic science The characteristics and problems of economic science Definition of economic science The differentiation of economic science from non-scientific areas Scientific method in economic science Scientific theories in economic science Value judgments in economic science The subject of economic science Economists and their scientific community The education of economists Economic science in the system of sciences The place of economic science in the system of sciences The scientific nature of economic science The relationship between economic science and other sciences ECONOMIC DOCTRINES IN PRACTICE The recent history of economic theoretic confrontations in the world Description A Topsy-turvy world Economic doctrines in the Western Balkans Economic doctrines in independent countries on the territory of former SFRY and Albania Part II: GLOBAL CRISIS 1. A DESCRIPTION OF THE REAL ESTATE-FINANCIAL CRISIS IN THE WORLD. 93 The creation and bursting of the mortgage and financial bubbles The creation of a legal pyramid scheme How did the financial crisis happen in the USA? The spreading of the financial crisis around the world Europe Japan Asia

3 China Latin America and Caribbean Africa Oceania Activities for the mitigation of the financial crisis The fall of the stock exchange indices in 2008 and their revival in the second quarter of The collapse of the hedge funds AN EXPLANATION OF BASIC CAUSES OF THE CRISIS The creation of derivative financial instruments and securitization. 116 Normative acts of financial liberalization THE IMPACT OF THE FINANCIAL CRISIS ON THE REAL SECTOR OF THE ECONOMY Signs of crisis Different effects of the recession in different economic sectors and regions The USA Western Europe Eastern Europe What is the response of the emerging markets? RESOLUTION OF THE CRISIS A systemic approach The proper sequence of rescue measures An urgent solution to the liquidity crisis The removal of bank solvency issues Assistance to the real sector Monetary incentives for the real sector Why was the dollar growing stronger than the euro? Fiscal incentives What can be learned from the historical experience of the crisis? The latest action for resolving the crisis in the world Solutions for the real sector and citizens

4 Solutions for the financial sector The role of central banks during the crisis The Islamic banking industry THE ECONOMIC AND POLITICAL IMPLICATIONS CAUSES, BLAME AND POLITICAL ECONOMY OF THE CRISIS Market fundamentalism as a cause of the crisis Who is guilty? The culprits for the arrival of mortgage and financial crisis The culprits for the mistakes in the process of crisis resolution The gate-keepers of the capital markets their misusers Political economy of the mortgage and financial crisis Close connection between neoliberalism and economic and political elites in power Part III. THE GLOBAL CRISIS, MONTENEGRO AND THE WESTERN BALKANS 1. THE VULNERABILITY OF MONTENEGRO AND THE WESTERN BALKANS TO THE CRISIS Why should the region feel less the crisis? An assessment of the situation and the vulnerability of the states of the region to the crisis Countries The monetary sector central banks Example: Activity of the Central Bank of Montenegro Financial sector The real sector of economy The population and the social situation Conclusion The external and internal causes of the crisis in the Western Balkans. 191 External negative effects The WIIW call to support the Western Balkan countries Additional unfavorable local factors The consequences of the crisis

5 Consequences for the financial sector Consequences for the real sector The ownership of companies and financial units during the crisis Types of ownership and groups of owners While entire developed world nationalizes, the transition countries of the region would still privatize De-tycoonization in current conditions? The subsidiaries of foreign banks are owned by foreign states A suitable ownership structure of a national economy HOW TO ACT IN PRACTICE? Measures proposed and adopted by May Montenegro Albania Bosnia and Herzegovina Croatia Macedonia Serbia Kosovo Slovenia (as a benchmark) Conclusion Solutions at the macro level of the economic system and policy General rules Stimulating economic activities Social policy increasing pensions for the poorest and increasing minimum wages Health and pension reform How to act in financial organizations? Banks Findings from the experience of others System improvements in banking Insurance companies Suggestions for the insurance company activities in crisis What can the government and supervisory authorities do for insurance companies?

6 Systemic changes in insurance Investment funds and the stock exchange Real sector companies Diagnosis of the situation in the economy The measures of the companies and other real sector entities Government and bank support to economy Individuals What principles guide an individual when investing or distribute his wealth in different forms of property? Inter-temporal preference as a discount factor Practical decision where to invest, what is worth having today? How should an individual decide today on borrowing, saving and dispersing assets? Current spending and saving Two negative lessons learned The dispersion of assets The role of government and monetary authorities in making key decisions in the crisis THE IMPACT OF THE CRISIS ON PACIFICATION OF CONFLICT IN THE BALKANS Foundations Crisis impact Part IV: CONCLUSION 1. A NEW GLOBAL FINANCIAL ARCHITECTURE Expert proposals concerning the elements of a new financial system Actions meetings of the world politicians in confronting the financial crisis Development in the EU A psychological outlook on the origin of the financial crises

7 2.A SYNTHESIS OF THE PROPOSED SOLUTIONS FOR THE WORLD FINANCIAL CRISIS AND THEIR CRITICAL OVERVIEW Neither liberal capitalism, nor orthodox socialism, but solidarism The meaning of the concept of solidarism Background Solidarism the term Pax Europea, not Pax Chinesis or Pax Asiatica in the 21st century The elements of solidarism The importance of solidarism for the Western Balkan region LITERATURE