Financial Crises: Socio-Economic Causes and Institutional Context (Routledge Studies in the Modern World Economy)

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This study explores the major patterns of change in the evolution of financial crises as enduring phenomena and analyzes the paradoxical position that crises are at once similar to and different from each other. Brenda Spotton-Visano examines economic, psychological and social elements intrinsic to the process of capitalist accumulation and innovation to explain the enduring similarities of crises across historical episodes. She also assesses the impact that changing financial and economic structures have on determining the specific nature of crises and the differential effect these have in focal point, manner and extent of transmission to other, otherwise unrelated, parts of the economy.

Financial Crises offers a consistent method for interpreting variations in financial crises through time and allows for a better overall appreciation for both the transitory fragility and enduring flexibility of financial capitalism and the potential vulnerability created by on-going financial development. Topical and informative, this key book � is of keen interest to all those studying and researching international economics and political economy.

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Financial Crises: Socio-Economic Causes and Institutional Context (Routledge Studies in the Modern World Economy) Review

I was incredibly impressed by the manner in which she pieces together her thesis. I'm not sure that I fully agree with her focus on behavioral aspects of crisis. I use to feel that was the case, but now I think it's actually something slightly different. Aside from being early (published 2006), she is a female voice in a chorus of males; and for that, I have great respect.

If I could give it 6 stars I would. She does a fabulous job of articulating the role of financial innovation. I will absolutely be using this book in my thesis for that reason. I adore that she clearly sees the problems of crisis to be a function of financial linkage and points straight to Minksy (who oddly has gone unmentioned in the current crisis).

The first thing that will most likely make my paper is on pg. 110. After an incredibly interesting discussion about the consolidation of financial players and their massively increased breadth, she revisits the entire argument in this pretty solid conclusion:

"The characteristic of the crisis will vary, however, depending on the state of economic and financial development. A financial market collapse that hits an economy in the early stages of development will be less severe than one that hits the financial institutions if the functional importance of the market for the economy is relatively small....In advanced economies, with well-developed financial markets providing an alternative mechanism for the management of liquidity and transfer of funds to finance commercial and investment activity, the potential for a market collapse that interferes with the economy's allocation mechanisms becomes greater. Finally, over time as the financial system becoms more integrated with the economy and the economy becomes more interconnected through and by the linkages afforded by the financial networks, we might expect the threat of crises to become more general and widespread and less specific or concentrated in a given area of economic activity in the absence of containment policies such as last -resort lending."

I love it. The implications of this really show in the current environment and show you which of the talking heads have a clue.

The next paragraph, P. 111 is also amazing. After a fantastic chapter where the argument moves from financial innovation to dis-intermediation of capital to credit growth, she concludes:

"The loss of important qualitative information about the management operations and the like could be recouped by the owners of capital were they so included, but the costs of doing so outweigh the costs of simply extracting oneself if the promise of advance fails to be realized. From the perspective of the individual, ignoring the business specific, qualitative information is efficient despite the ignorance being inefficient for the economy as a whole. By introducing deposit banks, some of the sources of qualitative information could be accessed, but the traditional maturity mismatch in bank portfolios combined with the unique characteristics of the bank's liabilities means that the financial system becomes that much more dependent on the state of confidence."

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