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National laws for global capital markets - A contradiction?: Difference between revisions
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National laws for global capital markets - A contradiction? (view source)
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A result of globalisation on capital markets is the rising quantity of financial instruments. (cf. The Economist, Edition November 21st - 27th, p.18). Besides classic instruments like shares and bonds or loans and receivables there are many different ways to invest money. Above all speculative instruments like swaps, forwards or commodity futures are gaining in importance and . These instruments are often used by institutional investors as funds to gain smallest spreads. 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. 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, E. N. (1988) Crashes and Panics, p.75ff.). | A result of globalisation on capital markets is the rising quantity of financial instruments. (cf. The Economist, Edition November 21st - 27th, p.18). Besides classic instruments like shares and bonds or loans and receivables there are many different ways to invest money. Above all speculative instruments like swaps, forwards or commodity futures are gaining in importance and . These instruments are often used by institutional investors as funds to gain smallest spreads. 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. 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, E. N. (1988) Crashes and Panics, p.75ff.). | ||
In history were several attempts to regulate the financial market. After World War II was a conference in Bretton Woods were a new financial system was decided. John Maynard Keynes wanted to set more strict conditions for the financial market. But finally he could not prevail his beliefs. (cf. Flaschel, P. (2009) The Macrodynamics of Capitalism – Elements for a Synthesis of Marx, Keynes and Schumpeter, p.34ff.). In 1972 James Tobin wanted to launch a tax on currency transactions. The spreads on currency transactions are so small that speculative investors spend masses of money in forex to gain yields. This ‘Tobin tax’ should prevent speculation. (Tobin, J. (1987) Essays in Economics – Macroeconomics, p.16). | In history were several attempts to regulate the financial market. After World War II was a conference in Bretton Woods were a new financial system was decided. John Maynard Keynes wanted to set more strict conditions for the financial market. But finally he could not prevail his beliefs. (cf. Flaschel, P. (2009) The Macrodynamics of Capitalism – Elements for a Synthesis of Marx, Keynes and Schumpeter, p.34ff.). In 1972 James Tobin wanted to launch a tax on currency transactions. The spreads on currency transactions are so small that speculative investors spend masses of money in forex to gain yields. This ‘Tobin tax’ should prevent speculation. (cf. Tobin, J. (1987) Essays in Economics – Macroeconomics, p.16). | ||
It is still to be clarified whether globalised capital markets can be regulated. National laws are just restricted valid and suitable. A supranational institution is required. Existing institutions like the IMF haven’t fulfilled this task because they aren’t provided with appropriate responsibilities. To solve this problem and to achieve stabile markets a reform of institutions is necessary. Besides that another cause of financial crisis is the greed of people and companies in a world of shareholder value. | It is still to be clarified whether globalised capital markets can be regulated. National laws are just restricted valid and suitable. A supranational institution is required. Existing institutions like the IMF haven’t fulfilled this task because they aren’t provided with appropriate responsibilities. To solve this problem and to achieve stabile markets a reform of institutions is necessary. Besides that another cause of financial crisis is the greed of people and companies in a world of shareholder value. | ||