A sophisticated, higher-level look at financial institutions in the new global economy, how they are interconnected, and why they fail.
Written for financial professionals, the authors thoroughly explain the modern global credit system; the roles of banks, hedge funds, insurers, central banks, mortgage markets, and other participants; and the credit-related instruments they rely on. In particular, the authors illuminate the crucial importance of liquidity, and show why liquidity failures have been the key cause of all major market crashes for the past several decades. The Global Financial System thoroughly examines economic environments in which slow de-leveraging leads to prolonged sluggish growth, and compares today's environment to other periods of deleveraging, such as the Great Depression and the Japanese economic meltdown of the '90s and '00s. It predicts potential pathways for the current crisis, and offers essential guidance to both policymakers and investment decision-makers.
Chapter 1: Motivation for Understanding Liquidity Risk 1
Chapter 2: Liquidity Risk: Concepts 11
Chapter 3: The Great Depression 59
Chapter 4: Japan’s Lost Decade 105
Chapter 5: The Great Recession 173
Chapter 6: Conclusion 247