Difference between revisions of "National laws for global capital markets - A contradiction?"

Jump to navigation Jump to search
no edit summary
 
(One intermediate revision by one other user not shown)
Line 18: Line 18:
Another result of globalisation on capital markets is the rising quantity of financial instruments. (cf. The Economist (2009) p.18). Besides classic instruments like shares and bonds or loans and receivables many different ways to invest money exist. Above all speculative instruments like swaps, forwards or commodity futures are gaining in importance. Also the number of possibilities to invest money has extended.  These instruments are often used by institutional investors as funds, especially hedge funds, to gain smallest spreads. Despite the narrow profit margins the consequent earnings are very high because of the large sum of money invested. As long as the rate of the underlying assets develops as expected the system works. But a recession can lead to a mood swing and in periods of crisis a panic can paralyze markets. Enormous sums of money are deprived of the affected region and a chain reaction can lead to a collapse of whole economies. (cf. White (1988) p.75ff.). Particularly the capital markets of the developing countries are suffering of the ‘globalisation of currency’. In Southeast Asia sundry capital markets collapsed in the 1990s while those of Europe did not. (cf. Meltzer (1998). So regulation is even more difficult for developing countries. This may be by reason of lacking experience, infrastructure and the dependence of developed countries.  
Another result of globalisation on capital markets is the rising quantity of financial instruments. (cf. The Economist (2009) p.18). Besides classic instruments like shares and bonds or loans and receivables many different ways to invest money exist. Above all speculative instruments like swaps, forwards or commodity futures are gaining in importance. Also the number of possibilities to invest money has extended.  These instruments are often used by institutional investors as funds, especially hedge funds, to gain smallest spreads. Despite the narrow profit margins the consequent earnings are very high because of the large sum of money invested. As long as the rate of the underlying assets develops as expected the system works. But a recession can lead to a mood swing and in periods of crisis a panic can paralyze markets. Enormous sums of money are deprived of the affected region and a chain reaction can lead to a collapse of whole economies. (cf. White (1988) p.75ff.). Particularly the capital markets of the developing countries are suffering of the ‘globalisation of currency’. In Southeast Asia sundry capital markets collapsed in the 1990s while those of Europe did not. (cf. Meltzer (1998). So regulation is even more difficult for developing countries. This may be by reason of lacking experience, infrastructure and the dependence of developed countries.  


Conclusion:
== Conclusion: ==
 
It is still to be clarified whether globalised capital markets can be regulated: “Since the authority of states is territorially bound, global markets can escape effective political regulation” (Held/McGrew (2006) Globalization). National laws are just restricted valid and suitable. This means if companies disagree with existing conditions of the market they leave country and open a new branch elsewhere. Multicorporate enterprises with different registered seats are not bound to national laws. And national governments have no option to compel them.
It is still to be clarified whether globalised capital markets can be regulated: “Since the authority of states is territorially bound, global markets can escape effective political regulation” (Held/McGrew (2006) Globalization). National laws are just restricted valid and suitable. This means if companies disagree with existing conditions of the market they leave country and open a new branch elsewhere. Multicorporate enterprises with different registered seats are not bound to national laws. And national governments have no option to compel them.
   
   
Line 30: Line 29:
The (eventually newly created) institution has to observe trading on capital markets. Especially institutional investors which are seated in liberal states like Luxembourg have to be controlled more strictly. Innovative financial instruments that played a part in contributing to the recent financial crisis should have to pass a detailed examination before obtaining permission. Without these variances the next crisis will be unstoppable.
The (eventually newly created) institution has to observe trading on capital markets. Especially institutional investors which are seated in liberal states like Luxembourg have to be controlled more strictly. Innovative financial instruments that played a part in contributing to the recent financial crisis should have to pass a detailed examination before obtaining permission. Without these variances the next crisis will be unstoppable.


== References: ==
*Flaschel, P. (2009) The Macrodynamics of Capitalism – Elements for a Synthesis of Marx, Keynes and Schumpeter
*Gowland, D. (1990) The Regulation of Financial Markets in the 1990s
*Griffin, K. (2003) Economic Globalization and Institutions of Global Governance
*Group of Lisbon (1997) Frontiers of Competition – Globalisation of Economics and the Future of Mankind
*Held, D./McGrew, A. (2006) Globalization
*Howells, P./Bain, K. (1990) Financial Markets and Institutions
*Khan, H. (2004) Global Markets and Financial Crisis in Asia: Towards a Theory for the 21st Century
*Loheide, J. (2008) Financial Markets without Borders – Regional Policy and Financial centre in Globalization
*Meltzer, A. H. (1998) Asian Problems and the IMF, from: http://www.cato.org/pubs/journal/cj17n3-10.html
*The Cato Journal, Vol. 17 No. 3 in 1998, Globalisation of Finance, from http://www.cato.org/pubs/journal/cj17n3/cj17n3-1.pdf
*The Economist, Edition November 21st - 27th
*White, E. N. (1988) Crashes and Panics


{{License cc|Stefan Marx}}


References:
[[Category:Legislation]]
 
Flaschel, P. (2009) The Macrodynamics of Capitalism – Elements for a Synthesis of Marx, Keynes and Schumpeter
 
Gowland, D. (1990) The Regulation of Financial Markets in the 1990s
 
Griffin, K. (2003) Economic Globalization and Institutions of Global Governance
 
Group of Lisbon (1997) Frontiers of Competition – Globalisation of Economics and the Future of Mankind
 
Held, D./McGrew, A. (2006) Globalization
 
Howells, P./Bain, K. (1990) Financial Markets and Institutions
 
Khan, H. (2004) Global Markets and Financial Crisis in Asia: Towards a Theory for the 21st Century
 
Loheide, J. (2008) Financial Markets without Borders – Regional Policy and Financial centre in Globalization
 
Meltzer, A. H. (1998) Asian Problems and the IMF, from: http://www.cato.org/pubs/journal/cj17n3-10.html
 
The Cato Journal, Vol. 17 No. 3 in 1998, Globalisation of Finance, from http://www.cato.org/pubs/journal/cj17n3/cj17n3-1.pdf
 
The Economist, Edition November 21st - 27th
 
White, E. N. (1988) Crashes and Panics

Navigation menu