Literature Review Global Financial Crisis Regulation

Global Financial Crisis Regulatory trade and Paradigm Shifts In early 2008, the economy ground to an almost contend halt. As the stock indexes were overwhelmed by a virtual tsunami of never relenting bolshie digits, it became clear that the monetary markets had been hit by a crisis the scope and home base of which had not been witnessed since the Wall Street Crash of the 1930s.Over time the causes became more than than clear, and as the dust settled, the world was left with several important capitulums to answer. first-year of all, there was the question of whether or not the global pecuniary crisis was genuinely caused by flawed regulations and monetary institutions or whether it is the fundamental behaviour of the financial market that is flawed, as caused by behavioural issues such as moralistic hazard and principle agent problems.As an extension of this, the second question involves whether or not financial regulation will be equal in realizing a stable and sustaina ble financial system or if a true paradigmal and behavioural shift is required. Finally and more a good deal, the trine question is how such a change may be brought roughly in practice, and which exact aspects of the financial paradigm should be altered in order to realize sustainable financial markets.As we step more closely at the following questions and the appropriate literature, one can perceive several issues, which may form the basis for further academic inquiry. first gear of all, it is clear that despite far reaching efforts of scholars, governments and other institutions to develop and take in financial regulation in response to the financial crisis, recent show suggests that these measures fail to recognize fundamental flaws in the paradigms and values Freewriting exercise Skills 3 Academic Writing S. N. Geesing 342570 2010-2011 underlying actions of main financial institutions and firms, which need to be addressed in order to realise a sustainable financial pro cess in the long term. From this main statement, we can now look into several direct causes of the crisis that can be related to the incentives that underlie these markets. one of these causes, as it appears, is the fact that Wall Street managed to lure the brightest minds in economics and mathematics with promises of wealth and fame, thus managing to consistently outsmart governmental institutions. By exploiting loop holes in regulatory frameworks, often done by underdeveloped complex financial derivates, the bulge bracket firms that set the tone in investment verifying gained access to nearly limitless profits, foregoing issues of ethics and fortune minimization in favour of short term and often personal gain.After recognizing this pattern, one may conclude that simply increasing bank reserves or bailing out mortgages (as many governments have done so far) will not allow for long term sustainability within financial markets. Other measures, such as increased transparency, caps on bonuses and reinvented incentive retaliate systems are more effective, but have proven difficult to practically implement. Introducing new regulation is always troublesome and this type of regulations has been met by weighted resistance, especially in the US, the place where new regulation is especially necessary.For this lawsuit and more, a more indirect way of changing values and paradigms mustiness be sought. Scholars have suggested that such measures are most likely to be found in economic theory and, more specifically, in forms of secret plan theoretical applications, in which the government and the financial institutions act as players in a game that can be described as the habitual economy and financial markets.