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Fixing Global Finance

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Fixing Global Finance

Johns Hopkins UP,

15 min read
10 take-aways
Audio & text

What's inside?

Global financial markets desperately need a tune-up. Here are a few fixes.

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Editorial Rating

8

Qualities

  • Comprehensive
  • Innovative
  • Scientific

Recommendation

Questions about current account deficits and international savings rates send many fiscal analysts into jingoistic declamations. But Martin Wolf isn’t that kind of economic commentator. He’s the sort who realizes that global financial markets are fiendishly complex and, thus, that easy answers are likely to be too easy. In this study, Wolf adds depth and texture to such hot topics as China’s massive savings rate and its huge foreign-currency holdings. This is primarily an economist’s analysis, so Wolf doesn’t address the way financial markets affect everyday consumers and entrepreneurs. getAbstract recommends his book to observers who seek a learned, lucid, forward-looking perspective on global financial markets.

Summary

The Boon and Bane of Global Finance

Financial markets, which are the global economy’s nerve center, offer many advantages: finance new businesses, makes home buying possible and allows insurance markets to exist. While critics love to hate financiers as profit-driven speculators, modern market economies couldn’t exist without finance. Alas, though, finance has proven far from perfect. This nerve center often suffers breakdowns, bringing bubbles, busts and costly crises.

Financial markets are so prone to meltdowns because they are built on “a pyramid of promises.” Bonds promise future payments; stocks promise ownership in a company; insurance promises a payout if a mishap occurs. Even currency now represents little more than a promise from the issuing government. Gold once backed the value of cash, but now governments issue money based on pure fiat. This web of promises has grown to encompass $140 trillion in financial claims worldwide. While promises grease the wheels of the global economy, when those promises are broken, the world’s economic engine sputters, showing the limitations of markets built on trust.

In actuality, this system of global finance based ...

About the Author

Noted economist Martin Wolf is the chief economics commentator at The Financial Times and professor of economics at the University of Nottingham. He is the author of Why Globalization Works and was named to Foreign Policy and Prospect magazines’ list of Top 100 Public Intellectuals.

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