By Howard Davies
The worldwide monetary obstacle overturned a long time of got knowledge on how monetary markets paintings, and the way most sensible to maintain them in cost. on account that then a wave of reform and re-regulation has crashed over banks and markets. monetary organizations are regulated as by no means before.
yet have those measures been winning, and do they cross a ways enough? during this shrewdpermanent new polemic, former crucial banker and monetary regulator, Howard Davies, responds with a powerful ‘no’. the issues on the middle of the monetary obstacle stay. there's nonetheless no potent co-ordination of foreign financial policy. The monetary zone continues to be too massive and, faraway from keeping the financial system and the tax payer, fresh govt laws is exposing either to even higher possibility.
to handle those key demanding situations, Davies deals an intensive replacement manifesto of reforms to revive industry self-discipline and create a more secure monetary destiny for us all.
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Extra info for Can Financial Markets be Controlled
When prices collapsed dramatically, the protection offered by offsetting short positions proved illusory. Some banks, in the vivid and uncomfortable language of the trading floor, quickly ‘burnt through their shorts’ and were left facing huge losses. The net capital approach imposed no discipline on the gross size of the positions banks took. The third problem, though it could not properly be laid at the door of the financial regulators, was that as the financial sector grew, so did some of the major banks and insurers.
Central banking After the inflationary turbulence of the 1970s and the 1980s, the 1990s and the early years of the new century were a golden age for central banks. Governments around the world had become converts to the idea that central bank independence was the best route to stable monetary conditions. Political control of interest rates had led to too many problems. After experimentation with money supply or exchange rates targets, most had settled on an inflation target as the nominal anchor of choice.
Even Cyprus believed it could become a regional financial giant, expanding into Greece, the Balkans and Russia. So we need to look beyond the activities of a few venal bankers to understand how and why financial markets ran out of control in the late twentieth and early twenty-first centuries. How was it possible for the financial sector to grow so rapidly, and for some financiers to grow so rich, so quickly? Were financial markets genuinely out of control? 21 2 The Global Financial Crisis There has been an outpouring of academic and popular literature attempting to explain the origins of the crisis.