Extract
[...] In the first part, we will see in more detail what financial globalization is and how it was born. In the second part, we will address the harmful effects it can have. During the Washington Consensus, liberals (under Reagan) began to think about ways to relaunch economic growth, it concerns the World Bank, the International Monetary Fund and the US Department of the Treasury. John Williamson (1937-2021) is the origin of financial globalization. He advocates for the well-being of populations, for this he proposes to open borders, liberalize trade, finance and privatize public enterprises. [...]
[...] The subprime crisis also marks a turning point in the idyllic model of financial globalization. In 2008, the Wall Street stock market collapses after the bursting of a speculative bubble. Initially, American banks granted mortgage loans to households that were not capable of repaying at variable interest rates. However, the interest rates, which had remained very low for several years, began to rise, and these households, unable to repay such a large amount, decided to sell their real estate to the banks, which led to the creation of the speculative bubble because the banks found themselves with thousands of real estate properties to sell as quickly as possible. [...]
[...] Today's financial crises do not affect only one country but have repercussions on the entire world, as is the case with the Asian crisis and the subprime crisis. It would be necessary to moderate speculation in order to stabilize the functioning of the markets. Financial globalization also affects businesses, made to facilitate exchanges, we realize that it provokes insecurity and instability of the markets of products and capital, which leads to more supply than demand. No form of economy is perfect but we can wonder what needs to be done to improve it, and find solutions for the current health crisis. [...]
[...] This Washington consensus is therefore trying to increase growth with the liberalization of trade and make the circulation of capital much easier. Financial globalization is also an increase in market finance that involves new intermediaries: institutional investors (banks, pension funds, retirement funds They also manage financial assets). It aims to fight inflation, it is the private sector that will be in charge of managing the economy because the state is not capable of doing so. However, with these major changes in the economy, this liberalization of exchange rates increases financial risks that will create new financial innovations, as well as the appearance of a new type of crisis, marking a permanent instability. [...]
[...] The Asian crisis marks a turning point in the economic world. In fact, a model of economy for many years, it will hit the most solid economies, which knew no imbalance, and spread quickly. The particularity of this crisis is over-investment, Asian countries defy all competition, in terms of prices, labor, but also resources. There were a lot of capital in circulation and countries were not able to manage the constraints related to financial globalization, which will cause this crisis. [...]
