This website uses cookies to ensure you have the best experience. Learn more

Has Financial Development Made The World Riskier?

1178 words - 5 pages

Economist Raghuram Rajan was one of the prophetic ones at the central bankers conference where Alan Greenspan was present in 2005 and delivered his paper asking, “Has Financial Development Made the World Risker?” The answer to this question in Rajan’s head was yes, but all other critics it was no, however more recent events; that of the 2008 crisis has proved him correct.
Rajam has thus written a 2010 business book of the year and Financial Times book of the year entitled, “Fault Lines – How Hidden Fractures Still Threaten the World Economy”. The author uses a geographical reference in the title of his book to show that there are cracks within the financial sector that have led to the global crisis of 2008. Prior to Raghuram being a professor at Chicago University, he was a chief economist at the International Monetary Fund (IMF) so his perspective and outlook is on global scale rather than just focusing in on the United States. He takes on an approach that includes growth patterns and rates in developing countries, and other financial crises to help the reader understand what is happening in the United States.
Rajan discusses three primary fault lines in the financial sector; the first being the domestic political stresses, especially in the United States. Starting in 1991, Rajan argues that recessions have mostly been “jobless” where there are more jobs being lost than created and inefficient jobs are being lost due to technology increase. Policymakers look for a quick fix to unemployment and offer easy solutions such as lower interest rates, promote homeownership instead of fixing the root of the cause (improving education and retraining employees). Coupled with a weak safety net, there is more jobless anxiety and eventually pushes the Feds to act quickly rather than rooting the problems. The pressure for easy credit makes up the first fault line in this book.
The authors raises very good points when outlining the fault line of rising income inequality coupled with a weak safety net due to his IMF background and global knowledge. One weakness I would like to point out would be when Rajan seems to step out of his comfort zone to speak about homeownership, (Fannie and Freddie) “IT is difficult to reach any other conclusion than that this was a market driven largely by government, or government-influenced, money” (Rajan, 34). Indubitably Fannie and Freddie need to take some blame but it was more of Wall Streets doing which created the intense and instable demand for subprime mortgages.
The second major fault line that creates stresses in the financial sector is that of the unbalanced growth in the global economy. These trade imbalances Rajan is very well known for while working in the IMF. Export-oriented countries like China and Germany encouraged the debt-ridden developed countries to invest in these countries. China, being a managed capitalist economy, buys dollars from their international exporters but gives them local currencies so...

Find Another Essay On Has Financial Development Made the World Riskier?

Money Made the World Go Down

928 words - 4 pages skyrocketed. In the 22nd century a “breakthrough”, smart money, inserted with a microchip that emitted static electricity to “read” the mind of the nearest human to tell whether it was being stolen.They used to say “money makes the world go round”; there is a new saying “Money made the world go down”.Humans started to realise the problem when tycoons began spending up big on weapons and arms deals.When

Has the Impact of Cyberspace Made Us Interpersonal?

1773 words - 7 pages the play button to see the video or hear the sounds. A person becomes part of an experience in the real world. This includes everything that exists in the moment. The sight, sound, smell, taste and touch are all examples. None of these senses can truly be experienced in a virtual, online community. The Internet has no sensory awareness (Barlow). It boils down to information and textual communication. The interactions lack many of the common

"The World of Ganymede" a world I made up

1542 words - 6 pages Ganymede is made up of a series of continental islands. It is set in the medievil era while there are still some modern technologies such as microwaves, refrigeraters, telephones, and computers. Most people live in castle dwellings, however some reside in treeforts. Knights ride horses gallavantingl across the land, out to save the world, with their mighty swords. Although, you are just as likely to come across lady knights gallavanting as well

Devil take the Hindmost (A history of financial speculation) - by Edward Chancellor. A summary of the book which discusses speculation and how it has shaped the western world

1282 words - 5 pages Devil take the Hindmost (A history of financial speculation) - by Edward ChancellorJason MurdochThis book discusses speculation and how it has shaped the western world. The book spans from the Romans to Modern day but in keeping with the theme of this course observations will be restricted to the pre 1900 section as much as possible. The book focuses on western economies as the Asian world considers the whole stock trading for profit as being

Assess the claim made by interactionists that the social world has to be explained in terms of the meanings that the acotors give to their actions. (Points in essay may be elaborated on)

734 words - 3 pages modification of behaviour is an ongoing process of socialization and is changed by perceptions.The self, as interactionists call it is also a very important part of symbolic interactionism. The self is who we are and what our place is in this world. If you a person has an awareness of the self he can see how others perceive him and so becomes more conscious of the views of others. The concept of self has three main stages in it: the imitation stage

Globalization has disconnected the world. Comment

1261 words - 5 pages income gap, have drawn people further and further apart.However, proponents of globalisation may argue that it has provided people with all the tools necessary for connecting people - the internet, mobile phones, the media etc. It has therefore made it easier for bonds to be forger among people with international networking and the sharing of ideas between nations and people. Technically, globalization has connected the world, making it easier for

How has globalisation affected the world economy?

2802 words - 11 pages been running for over 2300 years, that of the idealist8 and materialists9. Such is the history of this conflict that it must be said in today's current political and economic situation. Capitalism and therefore globalisation has made the world what it is today.So for better or worse, globalisation has changed the face of the world dramatically in just over 300 years. It has encouraged and in some cases discouraged the introduction of small

Building Mentors in the Military. The US Army is recognized around the world for its exceptional leader development programs. In fact, it has no equal

973 words - 4 pages Building Mentors in the MilitaryThe US Army is recognized around the world for its exceptional leader development programs. In fact, it has no equal. We have made great strides in counseling our subordinates to help them improve their performance. But, turbulence, budget and other policy constraints have created the need for a more personal approach to taking care of our soldiers.The knowledge, skill and experimental requirements thrust on

The Financial Consequences of World War I

1372 words - 6 pages World War I was a major source of much of what happened in the world for most of the remainder of the century (MCELVAINE). The war radically altered international finance. The United States, for the first time, went from a net debtor nation into the world’s largest creditor (MCELVAINE). In 1918, after World War I, many European countries had sweltering debt (“Great”). Their debt became even worse because they owed the United States money. For

How has the director made the opening sequence of "What Lies Beneath" effective?

1681 words - 7 pages close up of her face. This forces the audience to focus on her face and make us realise she is the main character. The audience is made to focus on Claire's facial expressions, which indicate shock. This unnerves the audience, making them wonder why she is submerged beneath water. The cameras focus changes to a mid angle shot of Claire gasping for breath, and lying in the bath. We are intrigued as to why she is in this state. This shot remains for a

Has the Civil Procedure Code Been Made More Effective and Justice Oriented?

2335 words - 9 pages justice and should not be interpreted in such a manner so as to defeat the very object sought to be attained. The Government along with the Law Commission has always tried to keep this provision intact, that of procedural law being the facilitator of justice in subsequent amendments to the Code of Civil Procedure. The amendment of 1976 was brought forward keeping in mind several considerations , primarily that every litigant should get a fair

Similar Essays

Addiciton To The Internet Has Made Us Lose Touch Of The Outside World

1801 words - 8 pages . online shopping, banking, and socializing. To have all that information at your disposal would make certain people rely on the Internet for a lot of their every day purposes. This is a problem because people in modern society have been accustomed to use this interface as of form of interaction toward the world; Having access to the Internet has made it possible for people to become addicted to relying on the internet, making us lose touch of the

The Best Mistake Our World Has Ever Made: The Industrial Revolution

684 words - 3 pages revolution is happening for a reason. In this very second it is helping our present day and our future day more and more. Our transportation that involves trains getting us to our destinations and saving us time and money is a huge plus, having neighbors to spend time with and go to work with helps build a better life in all, and last but not least having an occupation that pays the necessities for our everyday lives. The industrial revolution is the best mistake our world has ever made.

Has Technology Made Us The Dumbest Generation?

1469 words - 6 pages of technology is efficiency in virtually every aspect; businesses, medical needs, educational resources, research, saving precious time and lives all have a positive effect bestowed upon them with increasing technology. Lynda Moultry Belcher agrees with this when she states: Technology advances show people a more efficient way to do things … For example, education has been greatly advanced by the technological advances of computers. Students are

How Has The Novel "Tomorrow, When The War Began", By John Marsden Made You Appreciate The World In Which We Live In?

832 words - 3 pages of the seven.The novel’s effect is greatly heightened by being based in Australia. We think of us as part of the golden three nations of the world; USA, UK and Australia. It’s barely imaginable that we could be invaded by another country. Marsden is obviously targeting the Australian audience as he has taken something dear to us all, our country, and in one swift movement he’s taken it away. The characters’ lives, their hopes