Summary
TYPICALLY, FEW PEOPLE TURN to dead French poets for economic analysis, but Stéphane Mallarmé proved wiser than many a billionaire financial trader when he wrote, "A throw of the dice will never abolish chance." Translated into the prosaic language of the global economic crisis, his epigram might read, "Even the sale of more than $60 trillion in credit default swaps will never abolish the risk of crummy loans."
In the early '70s, the post-war Bretton Woods system of global financial management crumbled. A vast global pool of unregulated "Eurodollars" - or profits that global investors and companies did not repatriate to the United States - eroded the power of governments to regulate currencies. This financial globalization accelerated broader economic globalization-the dismantling of government regulation in favor of a free hand for large corporations. It also triggered the birth of financial derivatives, which are products that derive value from some underlying, real commodity (like a futures contract in Swiss francs).Second, given the mysteries surrounding most of the financial world, regulators must ensure investment information is clear and comprehensive. To do this, [Joseph Stiglitz] argues for reforming many perverse incentives, banning exploitative practices and curbing risky business with "speed limits" on bank expansion. Other reformers propose more efforts by the Fed to restrain speculative borrowing or to require banks to increase capital reserves when the economy heats up.See the full content of this document
Extract
Beyond Casino Capitalism
TYPICALLY, FEW PEOPLE TURN to dead French poets for economic analysis, but Stéphane Mallarmé proved wiser than many a billionaire financial trader when he wrote, "A throw of the dice will never abolish chance." Translated into the prosaic language of the global economic crisis, his epigram might read, "Even the sale of more than $60 trillion in credit default swaps will never abolish the risk of crummy loans."
Until recently, the wizards of Wall Street believed they had abolished - or at least "managed"- risk so well that they could turn the global economy into a casino. By playing the roles of both the gambler and the house, they were always guaranteed to come out the winner....See the full content of this document
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