GGRA02H3 Lecture Notes - Lecture 7: 1997 Asian Financial Crisis, Financial Innovation, Investment Banking
Document Summary
England began to decline throughout the 1960s and 1970s leading firms to look elsewhere for profits. In response to regulatory control of finance, off-shore financial institutions were developed and the euro-dollar (cid:373)arket e(cid:373)erged. (cid:858)(cid:272)apital es(cid:272)apes the state(cid:859: finance, the world over, becomes deregulated as states seek to attract finance capital. Financial innovation takes hold, entailing the develop(cid:373)e(cid:374)t of thi(cid:374)gs su(cid:272)h as (cid:858)se(cid:272)urities(cid:859) a(cid:374)d (cid:373)o(cid:374)e(cid:455) markets. If profits/growth are being driven by the financial sector, the state becomes more responsive to the interests of finance. In this respect the governance and governing of societies is changed by shifting political economic relationships. Co(cid:374)sider (cid:272)alls for (cid:858)austerit(cid:455)(cid:859) at the state le(cid:448)el: subprime mortgages/// (cid:862)the pri(cid:373)e i(cid:374) su(cid:271)pri(cid:373)e does (cid:374)ot refer to the i(cid:374)terest rate; it refers to the (cid:271)orro(cid:449)ers. Meant to attract marginal buyers/borrowers but has more often than not led to bankruptcies as borrowers cannot meat escalated payments. By selling the (cid:373)ortgage (cid:271)a(cid:272)ked se(cid:272)urities, risk is supposedl(cid:455) (cid:858)spread-out(cid:859).
