Small Open Economies In Crisis

The current global financial crisis frequently is presented by many apologists as an unprecedented, unexpected, and unpredictable chain of events and outcomes that developed rapidly. Other members of the culpable apologist flock paint the current global financial crisis as an aberration, an event at the polar extreme of outcomes associated with the functioning of the business cycle, or as a chain of events and outcomes resulting from irresponsible consumers and home-buyers that were spurred on by governmental policies. All of these portrayals of the current global financial crisis put forward by the apologists for the actual casual agents of the chain of events are designed to attain specific objectives (Bayne, 2008; Economist Intelligence Unit, 2008; Organization for Economic Cooperation and Development, 2008). These objectives are to deflect responsibility and accountability from the perpetrators, prevent the implementation of policies that will prevent recurrence by increasing oversight and regulation of the financial sector, and transfer current and future wealth from ordinary people to the financial sector entities, their managements, and their investors to offset financial sector losses.

None of attributions by the apologists, as discussed above, is true. Attainment of all of the objectives sought by the apologists, as discussed above, must be prevented. Each of these goals is especially important for small open economies (Organizatio

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inancial derivative instruments. Such a financial derivative instrument then is split into tranches to create additional derivative instruments to the point that no direct links exist between a financial instruments and the securitized asset package. The third root cause is the trading in financial instruments by parties that have no proprietary link to the underlying financial assets from which such instruments are derived. The financial activities included in this casual area include what can best be described as casino-like side-bets and short selling. Short selling is a form of gambling wherein traders offer to sell equity stocks that they do not possess. The casino-like side-bets are associated with the trading of financial derivative instruments. As an example, an investor may buy a share of a mortgaged-based securitized asset package. This investor then may want to shift some of the risk of non-performance by the securitized asset package. To accomplish this objective, the investor will buy a credit default swap. A credit default swap is financial instrument. The instrument is an insurance policy that will guarantee (for a fee) the investor's capital investment in the event of non-performance. When the und

Category: Economics - S