Why is bed so much more appealing than gym? It’s clearly not the number of letters… #fail

Some girls make good pie. I make better pie charts than you’ve seen in a while.

Must remember to believe six impossible things before breakfast. It’s good practice.

“The bottom line, it seems to me, is that assassination is justified if it keeps us out of a war. But short of that, it’s not. The Mabhouhs of the world are best pursued by relentless diplomatic pressure and the rule of law.” - Robert Baer

Credit for find: Spencer Keys

Here is the last paper of my undergraduate career. This paper was written for a course I did in Bath and submitted to the Education Without Borders Conference 2009. It was selected and I presented the paper in March of 2009 in Dubai. Here is the paper.



Opportunity in the Crisis: Improvements for Global Financial Stability

Sub-theme: E-conomy: Global Solutions for Recovery

Xenia Maren Menzies

Simon Fraser University, Canada

On academic exchange to the University of Bath, UK

Abstract – This paper is a critical analysis of the current financial crisis by looking at reasons for systemic instability in both macroeconomic credit and banks. By looking at Minsky’s Instability Hypothesis and Cooper’s analysis of the role of governor, the argument is made for a stronger and more active Central Bank to act to reduce the swings in overall credit expansion and contraction. The instability in banks is identified as due to three primary phenomenons: inter-bank lending, the hidden risks of bad debts and poorly assessed high-risk derivatives, which are exemplified in Morris’s Innovation, Crisis, Consolidation cycle. Throughout, the failure of the Efficient market hypothesis stands evident. Proposals for reform require global cooperation in establishing Central Bank policy best practices and proactive regulators with a mission to limit and monitor bank risk. The paper ends in a discussion on where leadership for these proposals will come from and pushes for action now, while the crisis is still an opportunity for change.

Introduction

The current financial crisis has raised heated analysis among policymakers and economists alike. In a public online debate, the Dean of the Said School of Business at Oxford put it well when he said, “The events of the last year have brought to the fore a debate that many people thought had died with the collapse of the Soviet system - the future of capitalism.” (Mayer 2008) Economic policy has become synonymous with concepts like prosperity, job growth and security. At the same time, Free Market principles and privatization have reduced the scope of government and regulation. When the financial system began to collapse, much debate began about the role of regulators leading up to the crisis and the measures which could have been taken to prevent the global strife we are now experiencing.

The root trigger of this crisis was a credit system failure. As sub prime loans and collateralized debt obligations began to give signs that they would not deliver the promised returns, the entire system realized it was holding insolvent, toxic credit, and it seized up. As credit tightened, American homeowners were the first to default on their loans. Banks wrote down debt in the US, leading their counterparts abroad who had invested in US banks to write down their holdings. Demand fell in the United States and other banking countries hit by the severe losses, ricocheting through the world trade system and leading to all out recession. How did it get to this point? What causes credit to become insolvent and why do banks fail? What can be done to prevent or diminish crises in the future? This paper will delve into these questions by first considering the macroeconomic reasons for credit instability and then the bank level reasons for instability. By looking at the causes of instability, we can propose solutions for a more stable system. The opportunity in the crisis is to re-evaluate our entire system so that, when the pieces are put back together, the result is a stronger and more stable system - not simply a temporarily recovered but equally crisis prone system.

Systemic Credit Instability and Governors

An Inherently Unstable System
Free Market and laissez-faire theory has largely dominated Western economic thought since World War II. The Friedman school of thought has argued that markets provide efficient and ideal equilibrium outcomes. Friedman has even gone so far as to argue that the Federal Reserve should be abolished. (Cooper 2008) The debate over the role of the central bank is based on the efficiency of the market. If the market can optimize itself most efficiently, there is no need for a central bank. Proof of a mechanism that runs counter to efficiency would be a case for a central bank.

Adam Smith described market efficiency on demand and supply for goods and services, for which it generally holds. The problem with following this theory, as elegant as it may be, is that it doesn’t accurately portray credit and asset models. For assets, a lack in supply can lead to a rise in demand, even as price is rising. We see this in oil markets today. Credit is priced by underlying risk, which is based on trust and reinforced by overall asset values, a much more complex model than Smith’s simple supply and demand equilibrium. It is the link between assets and credit that is the most insidious to the efficiency and equilibrium model and truly shows the market’s inherent instability.

For this, we turn to a late modern economist, who has only recently been rediscovered due to the crisis, Hyman P. Minsky. Minsky (1986) exposes the reinforcing cycle of credit and asset bubbles. Loans are usually secured with collateral, in assets or anticipated future revenues. In an economy where credit is being extended, companies are making purchases and asset prices are appreciating. As these asset prices are appreciating, banks see an appreciation in the underlying collateral they have signed against their loans. In line with their set reserve ratios, they can extend more credit, either to the same companies or to new creditors. Eventually, they will run out of good quality employment of their capital and they will lend money that will not be able to meet its interest obligations. At this point, named a “Minsky Moment”, the economy will begin to contract. Asset prices will start to diminish, as there is less demand for them. Credit will contract even more violently as people and firms do not have the additional collateral to secure their loans. Banks will begin to call in loans and raise interest rates. Companies will stop purchasing, which will cause other companies to contract in response. This is recession. Slowly, consumer confidence builds again, companies start growing, banks start lending in search of yield and we repeat this process. Instability is therefore inherent in credit-based economies. Furthermore, these swings and their more stable points are hardly described as optimal, as they can mean either the extension of insolvent credit until a crisis at the top, or an inability for even the credit-worthy to get credit because of intense contraction at the bottom.

Fig. 1.Credit and Asset Model

The Role of Governors
The first job of a central bank is as the lender of last resort. The lender of last resort role is a key stabilizing and recovery feature of the central banking system. By guaranteeing a minimum of bank deposits and injecting money into the system if it seizes up, central banks help keep the system going and provide a basis for banks to trust that they can credit one another if they are chartered.


The second job is to attempt to keep the economy as stable as possible in monetary and credit terms. With our prior view to Minsky’s inherent instability, this is evidently a daunting task. It can be difficult to know where a Minsky moment is. But, it is the existence of the cycle that establishes the possibility and the argument for a governor to diminish the swings and the strife they cause. In his book, The Origin of Financial Crises, George Cooper (2008) makes the link between James Clerk Maxwell’s theory on Governors of mechanical systems and Governors of Central Banks. Maxwell describes four ways in which a machine can operate which Cooper corresponds to the functioning of the economic system in relation to its governor:

1) The disturbance may continually increase – the Financial Instability Hypothesis – where the cycle feeds on itself,
2) It may continually diminish – The Efficient Market Hypothesis where the market corrects instability,
3) It may be an oscillation of continually increasing amplitude – Poor Central Banking – where central banks feed the instability and increase the magnitude of the cycles
4) It may be an oscillation of continually decreasing amplitude – Good Central Banking where the Central Bank is able to decrease the magnitude of the cycles

Cooper argues that central banks are currently increasing the swings by mistiming the moments and their stimulus packages. John Maynard Keynes proposed stimulus packages in his seminal work, The General Theory of Employment Interest and Money. Economic stimulus was not meant as a pre-emptive measure, but as one aimed at re-start once the economy had truly stalled. Doing otherwise would be the similar to using a defibrillator on someone who was on the way to having a heart attack but had not had one yet – not only ineffective, but dangerous. In the case of central banks and governments using stimulus packages to boost their slipping economies without reforming overburdened credit, the packages have worked to give temporary asset boosts, but not to solve the problems of overstretched debts. In fact, higher asset prices make bad debts appear better collateralized than they are. Worse, it prolongs and even aggravates the inevitable. When the economy does start to come down, it has a lot harder to fall from the elusive central axis. This is Cooper’s argument that the Central Banks are in fact accelerating problems instead of mitigating them. Cooper first recommends that central banks adopt an even handed approach towards swings upwards and downwards – acting to curb upward swings in the economy as much as it acts to curb downward swings in a control system paradigm where smaller and more frequent swings are desirable insomuch as they prevent larger and less controlled swings. Second, he recommends that central banks adopt a fire drill approach to testing if the credit in the system is solvent by suddenly raising or lowering interest rates at unpredictable times. This would act to shake out very insolvent credit from the system, as its borrowers would not be able to afford the raised interest payment. It can also indicate a higher capacity for credit if a small sudden drop in rates results in significantly more credit being taken on. It would also test the risk in each bank’s systems by and allow for a readjustment prior to a credit crisis.

While central banks are important to the stability of the system, it appears that they are reacting too soon, pressured by politicians and industry to keep the consumer price index from falling, instead of focusing on the banking issues of credit creation and asset bubbles. Stability would be improved if these banks had stronger independence from political pressures and a central institution of their own to coordinate them. In his day, Keynes went as far as to argue for a global central bank when he was consulted on improving the banking system. (Cooper 2008) The Bank for International Settlements (BIS) and the International Monetary Fund (IMF) have taken on much of this role of central forum and standard maker. Compliance with their requests is still up to the national government. As they are lenders of last resort, there is pressure on the country to comply or lose future access to the funds and support. Neither are regulatory bodies by any means yet but we may see them taking an increasing role in stabilizing the world economy by stabilizing central bank policy in international consortiums. It is also not enough to look at the credit system as a whole; we must look at the banks within it and their stability.

Bank stability

Default risk and Inter-bank lending
Banking began with merchants depositing their gold for safekeeping. These banks made two important innovations. First, they eased trade by introducing bills of exchange, which could be drawn at their bank, or soon after, at a network of banks which built confidence in one another. These bills of credit – from the Latin credere, belief, or trust in – became a currency and made it so that actual gold no longer needed to be moved around. It could be kept in banks.

Second, they were the first to standardize lending out more than they had in their vaults. These merchant bankers realized that while merchants were depositing and retrieving their gold, en masse, these plusses and minuses balanced out so that a very small proportion of the gold they held was leaving the vaults at any one time. They began to write and distribute bills of credit for more gold than they had, trusting that their reserve would be enough to cover any withdrawals needed by their clients, most of whom were still trading on credit. They multiplied their bills of exchange and commissions. Problems happened whenever someone realized that a bank might be overcommitted in its credits and may not have enough gold to service them. Then, clients would line up to remove all of their claims on the gold first, before the bank ran out of money. The bank would run out of gold quite quickly and fail. Other banks holding credit notes from that bank would be left with worthless pieces of paper, thereby reducing the amount they could lend. These were the early banking crises.

These bankers were primarily Italian at first in the 15th Century, Dutch through the 18th Century and British by the time that Empire ruled trade in the 19th Century but the merchants, their trading partners in the east (who held notes as well) and the movements were very much an international network. (Morris 1999 chapters 1 and 2) If a Dutch shipment was lost in China, a British bank holding the guarantee note for it could be the one at a loss. This international inter-bank lending and risk of default and contagion is the prototype of the problems we are still seeing today. Banking risk is, and always has been, global. Today, we see more ways in which this globalization of finance has been accelerated. Banks are invested in the stock of other banks, inter-bank lending is standardized, and governments borrow from foreign private investors. Diversified portfolios include geographic diversification, launching even the average investor into global risk. This has led to more rapid and powerful international contagion – when one system, country, or area gets sick, so do the others.

The freezing up of the system and the violent contraction of credit was in large part because banks stopped trusting one another not to default. In order for banks to trust one another they need to be clear about what kind of assets one another holds and how solvent they are. With the introduction of derivatives, measuring assets was very much dependent on being able to measure the risk of financial innovations.

Hidden Risk
Much of the instability of our current system is because banks are taking great risks which they calculate to be hedged against other risks – betting one position with one bank, while better another with another player and assuming that this equals out to zero. One portion of this risk underestimation lies with the leverage in the market coupled with the insistence on a predictable efficient market with a predictable set of outcomes and risks. The firm Long Term Capital Management (LTCM) was the ultimate test of market efficiency and standard financial models. It had Nobel-prize winning models, their inventors and some of the cleverest traders on Wall Street. Yet, in 1998 it lost billions in the leveraged derivatives market with consecutive months of price movements that were meant to be near impossible. The industry formed a consortium of new funds and oversight in order to unwind LTCM’s position in the markets, but the lesson is proving to be much more difficult. Even as recently as 2007, Goldman Sach’s Chief Financial Officer told the Financial Times “We were seeing things that were 25-standard deviation moves, several days in a row […] There have been issues in some of the other quantitative spaces. But nothing like what we saw last week.” (Thal 2007) It seems learning that the market is not efficient or normally distributed is a difficult lesson, and one that the industry has not yet fully integrated into its systems. According to the Economist (2009), this simply shows the weakness of the models and of the systems used to assess risk which are based upon them. So-called “fat tail” events, resulting in more days of large losses than should be possible under a normal distribution, suggest that markets are much riskier than most banking models account for. The lesson that should have been learned from Long-Term Capital Management is that high leverage is incredibly risky and that even the best of models are not accurately predicting hedging. It seems from this financial crisis that this lesson was not learned and that risky practices permeated the entire system, which could not be bailed out by an industry consortium this time.

Risk also lies in the hidden nature of positions and proprietary models. Banks have a hard time knowing the position of other banks to fully understand the risks that one bank’s position in the markets poses to the others. First, many large banking systems are by necessity global legacy systems, pieced together from different patchwork systems, as they work with different global units with many different products. (Morris 1999) Being able to understand where the overall position of their bank is in all instruments is a daunting task, as geography, currency, instrument and risk features can all differ. Knowing the position of other players is even more challenging. Banking risk systems are quite opaque to one another. A trader at Goldman Sachs cannot access the risk system at Morgan Stanley to see who that bank has sold their hedged swap legs to, and predict, using their risk systems, what the probability of a third bank’s failure is. Even if a bank did have information that a bank had taken too risky of a position, its incentive would not be to use consensus to unwind that banks position in the favour of all banks (if that bank were even to listen to competitive advice and back down from a likely profitable venture). But, what would be more likely to happen is that the monitoring bank would act as the first mover in removing its support for that bank, benefiting from being the first mover and likely keeping most of its capital, but likely signaling to other banks to withdraw their money and leading to the collapse of the risky bank. So, when it has reached that point, it is too late.

Innovation risks
In his book Money, Greed and Risk, Charles Morris (1999) argues that it is the cycle of innovation, crisis, and consolidation of financial instruments and their distribution that creates instability in institutions, which then threatens the system. Banks are tempted into this cycle by their business models. Banks make profit by attracting investors. Investors usually chase yield. Banks that refuse to risk with new products see their clients leave, in effect killing off the stable banks and incentivising the high risk-takers. When one bank finds a new profitable instrument – for example a junk bond, or a Collateralized Mortgage Obligation – it is usually not long until other banks have either created their own version or invested in the first. Morris cites examples of this innovation cycles starting from Jay Gould’s railroad junk bonds in the late 1800s, many of them sold to the British Upper Classes, all the way up to the famous Leveraged buy outs of the 1980s. He argues that with every innovation, there are hidden risks that do not appear until there is a build up of critical mass in the instrument, which shows the risks and creates a crisis. In response to the crisis, there is a consolidation to make the new instrument safe for common investors. Usually the instruments stay on in their safer forms or in smaller capacities.

In one such cycle in 1982, Chase Manhattan realized, to its shock, that what was meant to be a ‘side-business’ in facilitating the trading of repurchase agreements had somehow left it with a position of 4 billion dollars in margin accounts with its largest client Drysdale securities. Because it had been tracking only transactions, which it conducted on behalf of its clients – who remained anonymous by using Chase as the name on the sale tickets – it did not have accurate statistics on the risk positions and Chase did not realize until it was too late that, as the signer on the slips, it was responsible for defaulting counterparties. The size of the positions was massive and risked many of the large banking firms if it had not been wound down. This was the first time that Wall Street realized that risk taking in one instrument could endanger the stability of the entire market. (Morris 1999)

What the industry did not learn from Chase or Long Term Capital Management, it is being shown again this time around. This most recent crisis used credit default swaps and sub-prime mortgages in pools chopped into various credit ratings. Banks were able to hedge away risks by selling different legs to different banks. At the same time, they used this new hedging to swallow up the most risky slices of the collateralized mortgage obligations they were designing. Both of these methods existed previously, but the incremental innovations and couplings allowed risk to be masked in ways that made it difficult to detect. Just as before, all it took was one bank failure to show that the risks had been grossly underestimated, jeopardizing the whole system.

Monitoring and Regulating Banks
Inter-bank stability can be significantly improved with regulation and enforcement targeting excessive risk positions. Regulators currently have access to the accounts of chartered banks and, at least theoretically, to their risk systems. By limiting the amount of risk banks can take, or discounting the value of their assets more significantly if they chose to take on more risk, regulators can reduce the incentive of banks to take on heavy risk and assure other banks that the default risks of vetted banks are significantly reduced.

Some may propose a stripping down of the system. While this may solve some of the complexity and reduce hidden risks, there are arguments in favour of being able to keep even some of the most fallible of instruments. For example, Michael Milliken’s junk bonds are still in use for special company financing needs and have become a common part of a diversified pension portfolio. (Morris 1999) The question to bear in mind is scale. In order to have a stable market, these instruments cannot be allowed to dominate the market, or take on such a highly leveraged position as to risk the integrity of the system. Most of these instruments, junk bonds, repurchase agreements and CDOs, only took a few years to have a cycle of innovation, crisis and consolidation – Wall Street has always moved quickly, even in the days of Jay Gould. Proactive regulation can limit the speed at which new instruments grow in market size and much more carefully monitor their impacts and risks.

It is important that regulations applied are applied across borders, as capital is increasingly global and the prospects for “offshoring” are increasing. In 1999, there were 69 international financial offshore centers in operation. In the period from 1992-1997 alone offshore cross-border funds grew at a rate of 6.4% annually, reaching US 4.9 trillion. Offshoring is pervasive and seeks benefits from reduced taxation and regulation regimes. (Errico and Musalem 1999) Offshoring to weaker regulation regimes will increase if regulations tighten in one area but are not matched and enforced globally. For this reason, consensus must be developed internationally in the areas of bank risk monitoring and regulation.

Conclusion: the Present and Future of Financial Stabilization Policy

This paper has focused on the components of instability: inherent credit instability as described by Minsky and bank risks in inter-bank lending, innovation cycles, and the opacity of risk systems. The solutions are twofold – 1) a stronger and more even-handed Governor to reduce credit cycle swing, and 2) more rigorous global monitoring and limiting of credit and derivative risk. Stabilization policy requires strong and independent regulators willing and able to act to reduce swings, be it through Cooper’s interest rate fire drills or through limiting the amount that a certain derivate can trade until regulators feel that Morris’s innovation cycle has passed. Regulation needs to focus on the behaviour of instruments and their underlying collateral and risk profiles. These proposals are theoretical, broad scale, and applicable to credit and market based economies globally. The problem in their implementation is coordinating political will.

The global financial crisis brought on by sub-prime lending and credit default swaps has stirred the world’s interest in banking regulation. Around the world, forums are speaking about the need to work together. Financial stability is the primary topic at the World Economic Forum Meeting in Davos this week. The Bank of International Settlements’ Basel Committee on Banking Supervision proposed new enhancements to the Basel II Framework two weeks ago. These new additions include a capital regime for trading book positions (Bank for International Settlements 2009) World leaders are working towards stability but the question remains of how the agreements will be enforced and who will be at the bargaining table. The Bank for International Settlements only has 55 central bank members. The World Economic Forum has no formal relationship to governments. “The typical [World Economic Forum] Member company is a global enterprise with more than 5 billion dollars in turnover.”(World Economic Forum 2009) These are not democratic or truly global institutions. There is a need for global regulatory leadership in order to accomplish the feat of global stability. The Bank for International Settlements and the International Monetary Fund, having been lenders of last resort to the global system before seem poised to take on the role, but they will vie with nationalistic and supra-nationalistic ambitions, as the EU, The Federal Reserve, the large companies represented in the World Economic Forum, and other world players, who all will fight to see their perspectives and interests influence the model to be adopted. Finding a balance that will work best for the world will be a challenge. This does not mean we should not try.

The United Nations, which is the most representative supra-national body, has taken on the cause as well. In the Introduction to the United Nations Interactive Panel on the Global Financial Crisis, the Office of the Secretary General states: “Developing countries now represent a much larger proportion of world economic activity than they did when the Bretton Woods institutions were founded but their voices and interests are not sufficiently represented in the global councils of economic governance. Developing countries – as a group – are now net creditors to the global economic system and have an abiding interest in a rules-based and impartial revamping of global financial policies and institutions.“ In the same brief, the United Nations makes it clear that it intends to be a body for financial system reforms. (Brockman 2008) With all of these overlapping institutions and bodies attempting to come up with the same reforms, it is unclear who will be responsible for the global coordination. In fact, global coordination and cooperation itself is threatened as nations buckle down into recession budgets. The nationalistic imperatives of governments can undermine common frameworks in their negotiations or in their implementations. Some are expressing fears of protectionist measures, which might further damage the system. Today, in Davos, India’s trade minister said India had seen signs of protectionist measures and is prepared to respond. (Lynn 2009) It is unclear which direction will win if global consensus to stabilize is not acted on soon.

The Editor of the Economist’s Special Report on the Financial Crisis, Edward Carr (2009), says in this week’s podcast that the world is faced with a decision between two systems. One is the system that was designed after the Great Depression to make investments safer. This system was highly regulated and slow to adopt new innovations, but was quite stable. Carr likens the system to the tortoise in the fable of the race – slow, sure and steady. The alternative, is the hare, which is much faster, more innovative, less hindered - but can be overzealous, exhaust itself and crash. The hare is very much what Minsky spoke about in the inherent instability of the system and Morris’ cycles of innovation, crisis and consolidation. The current ‘hare’ laissez- fair and crash system that we have is largely a result of the deregulation we saw during the Reagan-Thatcher eras. Carr points out that Academic studies have attempted to weigh the benefits of innovation and speed, to that of the stability of heavier monitoring and regulation and up until now they found that innovation outweighed. Yet, he points out that the recent drop could be substantial enough to outweigh those benefits. The point, according to Carr, is to consciously choose between the tortoise and the hare. If we are to choose instability, we must acknowledge the risks and swings in the market and the strife these will cause. According to the fable, the tortoise wins the race because he is slow and steady and because the hare is overconfident in his speed. The same may be true for deregulation being overconfident in its speed to get to the ‘end goal.’

When it comes to global economic conditions, the end goal is much more complex than a fabled finish line. National competition for capital and growth can lead to diminishing regulations worldwide and while some gain, the losses may not even out. It is also important to remember that even if end prosperity is a goal, the path is incredibly relevant. Wild swings are not equal in their social effects. Rich nations and the wealthy in society are much better equipped to handle swings in prices, credit and job availability. The poor, both poor nations and the poor within nations, are not. It is not socially equitable to allow many people to be suffering and impoverished so that a few can gain from large market swings, even if the net gain might be positive. We must keep the fairness of the system in mind and it is that fairness that the UN speaks of above as “a rules-based and impartial revamping of global financial policies and institutions.” Stabilization and cooperation is the only path that can provide increased equality in the system.

It is important to recognize that this is a moment in time where we have the chance to choose the purpose of our economic system again and to work together to implement these measures. The crisis is an opportunity only while it is still uncomfortable. The headlines, which were once dominated with banking problems calling for banking regulation, have turned to recession discussions and stimulus solutions. As we can see from the current economic forums and supranational bodies, there is still an appetite for change. This appetite will diminish once we are up and out of the recession, and may even be silenced in some countries as things start going well and proposed regulation changes threaten the new sense of certainty. The Bank of Canada has optimistically predicted that growth could resume as early as the third quarter of 2009. (CBC News 2009) The lessons from Minsky’s Instability Theory and Morris’ Innovation Cycles is that crisis or the threat of crisis will happen again both because of the nature of credit cycles and the nature of learning from innovations. The question is not if we can prevent these cycles, but the question is how prepared we are to work together to diminish the next cycle’s impact. The time to decide and act is now. As the Premier of my home Province, British Columbia, has said, “It would be a shame to waste a good crisis.” (Kruger 2009)


References

Brockman, Miguel d’Escoto. 2008. “Letter to all Permanent Missions and Permanent Observer Missions to the United Nations regarding the Interactive Panel of the United Nations General Assembly on the Global Financial Crisis to be held on 30 October 2008.” 24 October 2008. Retrieved January 15 2007 from: http://www.un.org/ga/president/63/interactive/gfc.shtml

Bank for International Settlements. 2009. ” Basel Committee on Banking Supervision announces enhancements to the Basel II capital framework” 16 January 2009. Accessed on 20 January 2009 at: http://www.bis.org/press/p090116.htm

Carr, Edward. 2009. “The Future of Finance: a question of trust.” Economist. Published 22 January 2007. Retrieved as podcast 27 January 2009 from www.economist.com

CBC News. 2009. “Bank of Canada sees return to economic growth later in 2009.” CBC News. 22 January 2009. Acessed on 26 January 2009 at http://www.cbc.ca/money/story/2009/01/22/bankoutlook.html

Cooper, George. 2008. The Origin of Financial Crises. New York: Random House.

Economist. 2009. “Special Report on the Future of Finance.” Economist. 22 January 2009.

Errico, Luca and Alberto Musalem. “Offshore Banking: An Analysis of Micro- and Macro-Prudential Issues.” IMF Working Papers. January 1999.

Keynes, John Maynard. 1936. General Theory of Employment, Interest and Money. Amherst, New York: Prometheus Books

Kruger, Kevin. 2009. Minister of Small Business for Province of British Columbia. Personal Correspondence. 26 January 2009.

Larsen, Peter Thal. 2007. “Goldman pays the price of being big.” Financial Times. 13 August 2007.

Lynn, Johnathan. 2009. “DAVOS-Policymakers sound alarm over protectionism.” Forbes/ Reuters. 29 January 2009. Accessed on 29 January 2009 at http://www.forbes.com/feeds/reuters/2009/01/29/2009-01-29T191929Z_01_LYN934107_RTRIDST_0_DAVOS-TRADE-UPDATE-4.html

Mayer, Colin. Oxford Debates - The current financial crisis sounds the death knell for laissez-faire capitalism: opening remarks. 3 November 2008. Accessed on 20 January 2009 at: http://www.ox.ac.uk/applications/dynamic/debate.rm?id=8120&fullView=true

Minsky, Hyman P. 1986. Stabilizing An Unstable Economy. New Haven: Yale University Press.

Morris, Charles R. 1999. Money, Greed and Risk. New York: Times books.

World Economic Forum. 2009. “Members and Partners” Accessed on 22 January 2009 at: http://www.weforum.org/en/about/Members%20and%20Partners/index.htm

Note: re-posted because Ivy wanted to read it and my last blog is on lock down still. : )