Stability in International Finance Applications of Price Disequilibr
This book aims to explore stability in an international financial system using disequilibrium theory. It examines historical cases of both instability and stability and reviews price-disequilibrium theory to construct a theoretical model for a stable inte
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Frederick Betz
Stability in International Finance Applications of Price Disequilibrium Theory 123
SpringerBriefs in Economics
More information about this series at http://www.springer.com/series/8876
Frederick Betz
Stability in International Finance Applications of Price Disequilibrium Theory
Frederick Betz Department of Engineering and Technology Management Portland State University Portland, OR, USA Department of Technology and Society SUNY Korea, Incheon, Korea
ISSN 2191-5504 ISSN 2191-5512 (electronic) SpringerBriefs in Economics ISBN 978-3-319-26758-6 ISBN 978-3-319-26760-9 (eBook) DOI 10.1007/978-3-319-26760-9 Library of Congress Control Number: 2015961053 Springer Cham Heidelberg New York Dordrecht London © The Author(s) 2016 This work is subject to copyright. All rights are reserved by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. The publisher, the authors and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication. Neither the publisher nor the authors or the editors give a warranty, express or implied, with respect to the material contained herein or for any errors or omissions that may have been made. Printed on acid-free paper Springer International Publishing AG Switzerland is part of Springer Science+Business Media (www.springer.com)
For my dearest wife, Nancy, for her great help in the editing of the manuscript and assistance in trying to make the models of financial systems understandable.
Preface
Why are international financial systems unstable? To understand this, one must use a proper model for a financial market—a model which is not just normative but empirically valid. The traditional market model of price-equilibrium, while valid for commodity markets, is not empirically valid for financial markets. Instead, financial markets must be understood in a price-disequilibrium model. A price-disequilibrium model traces back to the studies of Irving Fisher, John Maynard Keynes, and Hyman Minsky. We present here a three-dimensional supply-demand model which can depict how, over time, a financial market can move from a price-equilibrium toward pricedisequilibrium, due to speculation—a financial bubble. Financial bubbles occurred in the Asian Financial crisis in 1989, the Global Financial crisis in 2007–2008, and the Euro crisis of 2010–2015; and these bubbles have depressed nation
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