Why the Package? Financial Markets Before and After the Crisis
The chapter provides an overview of the salient features of the Global Financial Crisis (GFC), which may be seen as a fundamental cut-off point in the legislation of markets, both in the USA and the European Union. The trouble interrupted a trend of appar
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Why the Package? Financial Markets Before and After the Crisis
Abstract The chapter provides an overview of the salient features of the Global Financial Crisis (GFC), which may be seen as a fundamental cut-off point in the legislation of markets, both in the USA and the European Union. The trouble interrupted a trend of apparent long-term growth, rapidly spreading negative spill-overs onto the so-called “real” economy. When the GFC broke out, new instruments and activities had arisen; new subjects had entered the investment industry; and regulators were desperately trying to keep on track with technology-driven financial innovation. Supervisors have powerfully intervened to halt the crisis: in particular, they have addressed some structural issues in finance (lack of transparency, insufficient protection afforded to investors, etc.). As a result, the business models of several intermediaries have been disrupted. The chapter discusses the main macro-financial characteristics of the years usually labelled as Great Moderation (GM): ‘easy credit’ practices, liquidity created by means of assets furtherly revealed to be illiquid, and a loose monetary policy fuelling the other two phenomena. Then, it analyses the propagation of the GFC, with a focus on credit institutions and the threats (e.g., shadow banking) that traditional players have been facing over recent years.
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A Brief Overview of Financial History Before the Global Financial Crisis
Throughout the eight decades before the GFC, many economists have repeatedly acknowledged that modern-day economic science is the result of the debate which followed the Great Depression, stemmed from the 1929 Wall Street crash (so-called Black Tuesday). Once the Second World War had marked a discontinuity in the prolonged, worldwide recession, the Bretton Woods Agreement—reached in the summer of 1944—showed that the shift in paradigm was a matter of fact, not merely an academic speculation. From the deep crisis of the Thirties, the global economy had come out with lower reliance upon the self-regulating virtues of markets, a renewed belief in the interventionist role of both governments and © Springer Nature Switzerland AG 2019 M. Comana et al., The MiFID II Framework, https://doi.org/10.1007/978-3-030-12504-2_2
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Why the Package? Financial Markets Before and After the Crisis
central banks, and an urgent need to endow the international monetary systems with a ‘safety net’ given by the interconnection between currency issuers and their mutual foreign-currency reserves. This was granted under the aegis of a dollar-centric scheme in place of the old, inadequate ‘gold standard’, which had so restrained monetary policy from effectively counteracting the recessionary phase by stimulating demand (Keynes 1936). At that time, many believed that the new era of open markets at a global realm, coupled with the larger role attributed to national authorities, would have yielded a steady, sustainable growth, also avoiding future crises. Taken as a whole, the sixty years afterwards hav
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