Wednesday, April 23, 2014

Bank Regulation In Era Of Globalization And Financial Bubbbles

In this paper the author argues that the regulatory and technological changes that define globalization can be directly linked to particular Bubbles beginning with the deregulation of gold in the 1970s, then Reagan and Thatcher's privatization, Japan's Yen/$ dollar accord, etc. This also explains why the idea of regulating financial bubbles has met so much resistance including Alan Greenspan's since it goes against the prevailing anti-regulation winds of the globalization trend and the prevailing view that free markets know best. 

However the recent financial crisis not only undermines the credibility of this view but also shows why a different bank regulatory approach is required to retain the benefits of globalization and market liberalization while avoiding or moderating the negative impacts from the re-emergence of larger and more frequent Bubbles with global impacts as happened before 1929. 

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