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5 results

  • 1 - Towards a New Model of Long-Term Finance

  • from I - Globalization and Financial Markets: a Dialectic Dynamic
  • Edited by Elisabeth Paulet
  • Book:
    Financial Markets and the Banking Sector
    Published by:
    Pickering & Chatto
    Published online:
    05 December 2014, pp 9-38

  • Summary

    Introduction: The Teachings of the Credit Crisis for Long-Run Investors

    The so-called subprime crisis started as a local disturbance in a particular segment of the US mortgage market. It quickly became a global credit crisis, harming the huge securitized credit markets. The acute contagion that enabled such a disruption reveals much more than a temporary market failure. The widespread and persistent distortions in market pricing and financial firms’ incentives points to structural flaws in the global financial system.

    Under lax monetary conditions and low inflation, the tremendous expansion of the financial system has not followed economic value creation. It has drained massive rents from the economy. To illustrate the point, in 1980 the share of profits captured by the US financial sector was 10% of total profit in the corporate sector. In 2007 it reached 40%. Meanwhile the financial sector makes up 5% of employment and 15% of value added of the corporate sector.

    The way the expansion arose suggests that the process could not go on forever. In the quarter of a century from 1982, the stock market capitalization of the US corporate sector was multiplied by 6. Within this tremendous growth, the share of the financial sector jumped from 6% to 19%. The counterpart of this rush to asset accumulation was the explosion of leverage. The share of debt in the financial sector was 10% of debt of the corporate sector in 1980. It surged to 50% in 2007.

    These amazing figures simultaneously highlight and hide a change in financial paradigm. Finance has mutated from a model of credit servicing the economy to quite a different one. From a micro-financial basis based upon the division of risk, endogamic transactions within the financial sector have proliferated under the pretext of risk transfer. They have created an endogenous force whereby market intermediaries have generated fat fees at each stage of the chain of risk transfer. Prodded by leverage, the process was an incentive to aggressive risk-taking that could last a long time thanks to hedging via derivatives.

  • The Regulation of Hedge Funds under the Prism of the Financial Crisis. Policy Implications

  • Michel Aglietta, Sandra Rigot
  • Journal:
    Recherches Économiques de Louvain/ Louvain Economic Review / Volume 75 / Issue 1 / March 2009
    Published online by Cambridge University Press:
    17 August 2016, pp. 5-34
    Print publication:
    March 2009

  • This paper deals with two issues. On the one hand, it shows that structural changes in financial markets and in the hedge funds industry make the “light-touch” arguments for regulating hedge funds no longer relevant. On the other hand, pleas for stronger regulation of hedge funds are getting more attention. In the first part of the paper the huge expansion of the industry is outlined and the state of current regulation is highlighted. In the second part an in-depth analysis of risks associated with hedge funds is carried out. It is shown that systemic risk can arise from leverage and from concentration of exposures amongst hedge funds. The part played by hedge funds in the spread of the crisis of structured credit is portrayed. In the third section, the recommendations of professional organisations, regulatory authorities and international institutions are summed up within the framework of risk mapping. This oversight shows the ways to reform: the need for direct regulation, the enhancement of indirect regulation and the overhaul of securitization. The prospective pattern of regulation encompasses macro- and micro-issues, and impinges upon factors of demand and supply. It emphasizes the enhanced role of public regulators and displays the conditions for an effective market discipline performed by long run institutional investors.

  • Genèse des banques centrales et légitimité de la monnaie

  • Michel Aglietta
  • Journal:
    Annales. Histoire, Sciences Sociales / Volume 47 / Issue 3 / June 1992
    Published online by Cambridge University Press:
    26 July 2017, pp. 675-698
    Print publication:
    June 1992

  • Des événements contemporains de première grandeur sont des champs d'investigation privilégiés pour nourrir la réflexion théorique sur la nature de la monnaie, sur son organisation dans les sociétés libérales et ouvertes, sur sa place dans la science économique.

    Les bouleversements de l'ex-URSS provoquent une désorganisation des échanges les plus élémentaires par disparition de la pratique sociale dont la monnaie est la règle : le paiement des transactions dans un médium unanimement acceptable. Le retour du troc souligne son énorme coût social : fragmentation des échanges qui se bilatéralisent, arbitraire des termes et des conditions de l'échange soumis exclusivement aux rapports de force entre les échangistes, immédiateté des relations économiques entravées par la désorganisation présente et l'incertitude future des approvisionnements. Les tentatives spontanées de contournement du troc entraînent la prolifération de banques de poche, hors de toute réglementation et de toute supervision.