Hsu, Sara (2012): The US financial system, the great recession, and the “speculative spread”.
Download (527kB) | Preview
The Great Recession was an enormous surprise to mainstream economists, while not as much to non-mainstream economists, due to differences in views of the financial economy and its interaction with the real economy. While policy makers continue to follow mainstream economic theory, with the implication that regulation and transparency can fix any market glitches, many remain skeptical of the ability of regulation to prevent this type of crisis in the future. Deeper restructuring of the economy, with curbs on the worst practices of speculation, are necessary to provide long-term stability. We have explored one way in which to measure speculation versus production, in what we call a “speculative spread,” and suggest that this may be an important means to understanding to what degree the economy is overfinancialized.
|Item Type:||MPRA Paper|
|Original Title:||The US financial system, the great recession, and the “speculative spread”|
|Keywords:||Great Recession, speculation, financialization, shadow banking|
|Subjects:||G - Financial Economics > G0 - General > G01 - Financial Crises
G - Financial Economics > G2 - Financial Institutions and Services > G20 - General
|Depositing User:||Sara Hsu|
|Date Deposited:||30. Apr 2012 15:19|
|Last Modified:||14. Sep 2015 03:45|
1. Avouyi-Dovi, Sanvi and Julien Matheron. 2005. Interactions between Business Cycles, Financial Cycles and Monetary Policy: Stylised Facts. BIS Papers No. 22.
2. Bernanke, Ben S. 2005. The Global Saving Glut and the U.S. Current Account Deficit. Speech delivered at the Sandridge Lecture, Virginia Association of Economists, Richmond, Va., March 10.
3. Bernanke, Ben S. 2007. Global Imbalances: Recent Developments and Prospects. Speech delivered at the Bundesbank Lecture, Berlin, Germany, September 11.
4. Bernanke, Ben S., Carol Bertaut, Laurie Pounder DeMarco, and Steven Kamin. 2011. International Capital Flows and the Returns to Safe Assets in the United States, 2003-2007. Board of Governors of the Federal Reserve System International Finance Discussion Papers 1014.
5. Clark, Timothy, Astrid Dick, Beverly Hirtle, Kevin J. Stiroh, and Robard Williams. 2007. The Role of Retail Banking in the U.S. Banking Industry: Risk, Return, and Industry Structure. FRBNY Economic Policy Review, December.
6. DeYoung, Robert. 2007. Safety, Soundness, and the Evolution of the U.S. Banking Industry. Federal Reserve Bank of Atlanta Economic Review, First and Second Quarters.
7. Federal Reserve Bank of Kansas City. 2003. The Role of Community Banks in the U.S. Economy. Federal Reserve Bank of Kansas City Economic Review, Second Quarter.
8. Froot, Kenneth A., David S. Scharfstein and Jeremy C. Stein. 1992. Herd on the Street: Informational Inefficiencies in a Market with Short-Term Speculation. The Journal of Finance 47(4): 1461-1484.
9. Gorton, Gary. 2010. Questions and Answers about the Financial Crisis. Prepared for the U.S. Financial Crisis Inquiry Commission, February 20.
10. Gorton, Gary and Andrew Metrick. 2010. Regulating the Shadow Banking System. SSRN Working Paper, http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1676947.
11. Greenlaw, David, Jan Hatzius, Anil Kashyap and Hyun Song Shin. 2008. Leveraged Losses: Lessons from the Mortgage Market Meltdown. US Monetary Policy Forum Report 2, http://www.chicagogsb.edu/usmpf/docs/usmpf2008confdraft.pdf
12. Hester, Donald D. 2002. U.S. Banking in the Last Fifty Years: Growth and Adaptation. SSRI Working Paper 2002-19.
13. Hsu, Sara and Jianjun Li. 2012. “Ideal” Financial Development and Financial Overaccumulation. MPRA Paper No. 38035.
14. Kalemli-Ozcan, Sebnem, Bent Sorensen, and Sevcan Yesiltas. 2011. Leverage Across Firms, Banks and Countries. NBER Working Paper 17354.
15. Keynes, John Maynard. 1936. The General Theory of Employment, Interest, and Money. Cambridge: Macmillan Cambridge University Press.
16. Kroszner, Randall S. and Philip E. Strahan. 2007. Regulation and Deregulation of the U.S. Banking Industry: Causes. Consequences and Implications for the Future. NBER Chapter 12571.
17. Mishkin, Frederic S. 2012. The Economics of Money, Banking, and Financial Markets. Upper Saddle River, NJ: Prentice Hall.
18. Nersisyan, Yeva and L. Randall Wray. 2010. The Global Financial Crisis and the Shift to Shadow Banking. Levy Institute Working Paper 587.
19. Pozsar, Zoltan, Tobias Adrian, Adam Ashcraft, and Hayley Boesky. 2010. Shadow Banking. Federal Reserve Bank of New York Staff Reports, no. 458.
20. Sherman, Lynn. 2000. Hedge Fund Investing 101. http://www.forbes.com/2000/07/15/feat.html
21. Strachan, Maxwell. 2011. Financial Sector Back To Accounting For Nearly One-Third Of U.S. Profits. Huffington Post, March 30.
22. Teslik, Lee Hudson. 2008. The US Financial Regulatory System. Council on Foreign Relations Backgrounder, October 2.
23. Titman, Sheridan and Sergei Tsyplakov. 2010. Originator Performance, CMBS Structures, and the Risk of Commercial Mortgages. Review of Financial Studies 23(9): 3558-3594.
24. US Senate. 2012. Summary of the Dodd-Frank Wall Street Reform and Consumer Protection Act. http://banking.senate.gov/public/_files/070110_Dodd_Frank_Wall_Street_Reform_comprehensive_summary_Final.pdf Accessed April 11.
25. Wheelock, David C. 2011. Banking Industry Consolidation and Market Structure: Impact of Financial Crisis and Recession. Federal Reserve Bank of St. Louis Review, November/December.
26. Wolff, Edward N. 2010. Recent Trends in Household Wealth in the United States: Rising Debt and the Middle-Class Squeeze—an Update to 2007. Levy Institute Working Paper 589.