Greed-and fear A special report on the future of finance Essay

The make-up discusses the many flaws in unionized monetary markets but concludes that these markets should continue to operate on principles of initiative or creativity and with a reason able-bodied amount of government regulation. While esurience may be part of the cause of fiscal market instability, naiveness and delusion contributed as well. Innovation in computer applied science couple with the mold of Black and Scholes in options pricing gave rise to the modern derivatives markets.(Greed-and charge A special draw on the future tense of finance) Natural woof happens in financial markets where companies be constantly changing to the latest product, i. e. retail banks began to focus on investment banking, and investment banks moved into the arena of postpone bills. The report calls into question the new form of financial market regulation. A major area of focus of the report is what factors lead to the boom and fag out market cycles that lead to financial instabilit y.The report describes three concepts, globalization, liberalization, and technological asylum as triggers of market booms, busts, and financial instability. (Greed-and charge A special report on the future of finance) This paper responds to each of these ideas as set frontwards in the report. Globalization According to the report globalization embraced by uphill markets along with low inflation in developed markets made point of reference grow more quickly and easily.(Greed-and fear A special report on the future of finance) However, as the markets are today, developed countries such as the U. S. and the U. K. are in near to full blown inflationary economies. nigh global markets are exposed to the U. S. subprime crisis. (Caruana) However, many emerging markets can unsex their exposure to the crisis by managing their levels of greed and fear. Greed is limited when these emerging markets do non invest in the derivative securities created by the subprime markets.Fear is managed when countries go for resources such as the International Monetary Fund, the IMF, for lending facilities that will get along to shore up a countrys credit call for and support the countys banking and financial institutions lending and business investment activities. ease Liberalization in terms of relaxing or reducing banking and financial industry regulations in countries such as Japan and the U. S. has led to airplane propeller value booms and bubbles which are followed by a bust cycle and finally financial instability.(Greed-and fear A special report on the future of finance) It can be argued that greed, particularly in the U. S. , led to a ataraxis of banking and financial industry regulation in order to facilitate greater innovation, liquidity, and credit availability in the financial markets. Hedge funds are thought to provide great efficiency, liquidity, and returns in U. S. capital markets. Industry regulation, therefore, should sustain served to facilitate innovati on in the table fund industry epoch protecting it from a financial crisis. (Bartiromo) This, however, was not the case.Widespread fears, both questioning and proven, about decline in assets values caused the federal government to measuring stick in with a new level of financial liberalization by means of bank ownership. Previously regulation was intended to provide a intelligent framework in which the financial markets could operate. The flowing level of fear has changed the end of regulation and extended the methods of regulatory activity to include providing funding and useable assistance or mandate to the financial markets. Innovation New technology industries are thought to create the need for specialized types of financing.(Greed-and fear A special report on the future of finance) This concept may work in a normally functioning economy. However, one can waitress at the alternative energy market to see that this concept is not working in the current economy. Industrie s like energy technology are capital intensive. Newer, more capital intensive industries generally depend on financing from private equities and hedge funds. (Alt-Energy Firms Sink With Prices, quotation New fuels) prior to 2008 fear caused the hedge funds and private equities to invest less in capital intensive industries.More recently as many hedge funds disappeared due to insolvency, this designer type of financing is no longish on tap(predicate) to new technology industries. The only existing sources of financing available to energy technology, particularly in the U. S. , is government investment or financing from financial institutions in which the U. S. government has a financing or available interest. Conclusion the results of Greed and Fear Greed and fear has led to current regulatory practices in which many governments are now owners of many financial institutions as opposed to simple regulatory agencies.The new trend in globalization will be that central banks in bot h maturation and emerging market countries will manage their countries financial markets and systems in a way that will limit exposure to booms and busts in international markets. erstwhile more governments develop controlling interests in banking and other financial institutions the certain liberalization referred to in the report should return and these institutions will be able to re-create innovative financing. Governments will regulate these institutions on two fronts as shareholders and as policymakers.As owners of banks and financial institutions, governments will also become investors in new technologies such as the clean energy industry. Where hedge funds and private equity firms no longer exist at foregoing levels, new technology firms will look to government equity as a viable alternative form of financing. Works Cited Alt-Energy Firms Sink With Prices, Credit New fuels, technology less competitive now, financing more scarce. (FRONT foliate NEWS). Investors Busines s Daily (Dec 2, 2008) A01. General OneFile. Gale. 19 Apr. 2009. Caruana, Jaime.Viewpoint A Significant Test Of Emerging Markets Taking A Global opinion Is Vital To Learn Lessons From Financial Market Turbulence And find The even up Approach To Move Forward In The Future, Says Jaime Caruana. (Viewpoint essay). The Banker (Nov 1, 2007) NA. General OneFile. Gale. 19 Apr. 2009. Greed-and fear A special report on the future of finance. The Economist 24 January 2009 1-15. Bartiromo, Maria. Straight Talk from the Fed New York Federal Reserve professorship Tim Geithner on housing prices, regulation, and the post-Greenspan era. Business Week Online (May 4, 2006) NA. General OneFile. Gale. 19 Apr. 2009.