Bond Market Root of Financial Crises?: derivatives as transformational Ponzi traps in the world financial system - C. Fiifi Odoom

The scope and/or expanse of the bond market (chapter 1) gives clues to its dynamism and capability that, in the absence of capable (regulatory) levee, it naturally degenerate into the once-a-decade breaches that we call financial crises, a reversal of financial fortune that, once nature's winds blow carries such loses beyond that of paper into real loses and way beyond national and even regional borders. Chapter 3 illustrates this with how only three small banks in a tiny country of Iceland (population 300,000) managed to export their own crisis to the rest of the world. With the bond market, everything is possible. Even a single company can export crisis. All aspects of our socio-economic lives now are tied to this $1-trillion-a-day bond market, a market whose daily trading value is estimated to be equivalent to Canadian yearly income (GDP). It is where most of our paychecks are issued from, where funds to build the bridges come from, where our student, car, and house (mortgage) loans come from. More importantly, this market, once the present reality is internalized, could very well turn our cherished theoretical world of economics and finance upside down. Some other relevant questions to be answered here include: methods of arriving at how Iceland, a country, consistently the top five in this millennium on the U.N. human development index (HDI); with income of around $40,000 income for every living soul; top-rated as AAA for it to qualify to borrow any amount at the best 'price'; all of a sudden 'lose it al' in 2008 while neighbor Norway that practiced prudence in the real economy is still standing tall. Norway's prudence is compared to the style and bailout plan that Warren Buffet offered, a plain vanilla (not derivatives) one that inspired confidence and, perhaps, 'saved' the world from sinking further. Finally, it is argued that conservative argument as told by efficient market hypothesis ((that asset prices (Iceland's value) reflects all information out there)) could very well be true as a special case - with a catch, of course. Once you make your winnings, cash it in before the decade comes. This once-a-decade crises cycle seem to be the disinfectant, in Schumpeter's words a 'douche' for our larger enabling society. That is the only way information could reflect in the price of assets. It is further argued that until the Asian Challenge is confronted head on, the likes of Iceland and the United States would, once again, fall back on the booby-trapped bond market for salvation, a fertile ground for crooks with Ponzi traps.

Author: Odoom, C. Fiifi
Publisher: iUniverse.com
Illustration: N
Language: ENG
Title: Bond Market Root of Financial Crises?: derivatives as transformational Ponzi traps in the world financial system
Pages: 00000 (Encrypted PDF)
On Sale: 2009-09-30
SKU-13/ISBN: 9781440165429
Category: Business & Economics : International - General
Category: Business & Economics : General