[...]... to unilaterally stabilize the exchange rate at an undervalued level This applies to most of the Asian countries that were directly involved in the Asian 5 The Global Economic Crisis: Systemic Failures and Multilateral Remedies financial crisis and a number of Latin American countries, but also to China and, to a certain extent, India The latter two experienced financial crises at the beginning of the. .. instance, there was much to be learned from the Long-term Capital Management (LTCM) collapse of 1998, from the Asian crisis in the second half of the 1990s and the Argentinean crisis at the beginning of the century A proper regulatory response at the national and international level would have played an important role in limiting the built-up and the consequences of the current crisis Regulators around the. .. the United States to many other countries, because current-account imbalances are mirrored by capital account imbalances: the country with a current-account surplus has to credit the difference between its export revenue and its import expenditure to deficit countries Financial losses in the deficit countries or the inability to repay borrowed funds then directly feed back to the surplus countries and. .. and developing countries alike, and proposes measures to address the systemic failures they have entailed: (a) how the ideology of financial deregulation within and across nations allowed the build-up of pressures whose unwinding has damaged the credibility and functioning of the market-based models that have underpinned financial development throughout the world; (b) how the growing role of large-scale... by the demand boom and mushrooming revenues of the last years D What should have been anticipated: the illusion of risk-free greed and profligacy The global financial crisis arose amidst the neglect of international governance – the failure of the international community to give the globalized economy credible global rules The sudden unwinding of speculative positions in the different segments of the. .. (http://www.federalreserve.gov/boarddocs/speeches/2003/20030508/default.htm) 11 The Global Economic Crisis: Systemic Failures and Multilateral Remedies should play an active role in monitoring and controlling markets They are able to do so because they are privy to the same information available to market participants, but only they are in a position to detect and avoid systemic risk by understanding better than market participants the limits to and the dangers of... risk spillovers and thus assessing the systemic importance of individual institutions 17 The Global Economic Crisis: Systemic Failures and Multilateral Remedies underperform and be likely to lose his clients and job Lamont and Thaler (2003) have shown that the presence of long-lasting deviations from fundamental asset values is made possible by the fact that very few investors try to fight the trend It... end of the global monetary system had made possible That the crisis originated in the Anglo-Saxon part of the developed countries was the logical outcome of the full swing towards unrestricted capital flows and unlimited freedom to exploit any opportunity to realize short-term profits The financial crisis has demonstrated the damaging impact of this “short-termism” on long-term growth But at the same... government intervention to stabilize the system by “government debt inflation” * * * It is instructive to recall the end of the Bretton Woods system, under which the world had enjoyed two decades of prosperity and monetary stability Since then, the frequency and size of xi The Global Economic Crisis: Systemic Failures and Multilateral Remedies imbalances and of financial crises in the world economy have dramatically... of CDS, see Wallison (2009) 15 The Global Economic Crisis: Systemic Failures and Multilateral Remedies 3 Micro and macro prudential bank regulation The current regulatory framework assumes that policies aimed at guaranteeing the soundness of individual banks can also guarantee the soundness of the whole banking system (Nugée and Persaud, 2006) It is micro-prudential but not macro-prudential This is . UNITED NATIONS CONFERENCE ON TRADE AND DEVELOPMENT The Global Economic Crisis: Systemic Failures and Multilateral Remedies Report by the UNCTAD Secretariat Task Force on Systemic Issues and. maintain global stability, to avoid the collapse of the international trading system and to pre-empt pro-cyclical policies by crisis- stricken countries. The Global Economic Crisis: Systemic Failures. aside and others to invest it into the future despite the fact that in the real world the investor is faced by “objective uncertainty” The Global Economic Crisis: Systemic Failures and Multilateral