[p2p-research] Financial Crisis -- What happened? What next?

[Michel Bauwens]

You are absolutely going to want to read it, if you want to understand the
financial meltdown:

'A (Crumbling) Wall of Money:
> Financial Bricolage, Derivatives and Power'
> by Nicholas Hildyard
>
> http://www.thecornerhouse.org.uk/pdf/document/WallMoneyOct08.pdf


---------- Forwarded message ----------
From: derek wall <wallddd at hotmail.com>
Date: Thu, Oct 9, 2008 at 7:00 PM
Subject: FW: Financial Crisis -- What happened? What next?
To: Michel Bauwens <michelsub2004 at gmail.com>, Pablo Navarrete <
pablo.navarr at gmail.com>




> Date: Thu, 9 Oct 2008 11:50:01 +0100
> Subject: Financial Crisis -- What happened? What next?
> To: notification-l at thecornerhouse.org.uk
> From: notification-l at thecornerhouse.org.uk
>
> -- apologies for cross-postings --
>
> -- please circulate to your networks --
>
> NEW papers on The Corner House website
>
>
> 1) 'A (Crumbling) Wall of Money: Financial Bricolage, Derivatives and
Power'
>
> http://www.thecornerhouse.org.uk/pdf/document/WallMoneyOct08.pdf
>
>
> 2) 'Taking it Private: Consequences of the Global Growth of Private
Equity'
>
> http://www.thecornerhouse.org.uk/pdf/document/PrivateEquitySept08.pdf
>
>
> Even without really understanding the current 'financial 9/11', one can
> pick up a sense of fear, panic and uncertainty.
>
> Blame for the crisis is attributed to 'greed and fear' . . . or
> insufficient regulation . . . or too high bonuses paid to financial whizz
> kids . . . or irresponsible lenders pushing cheap loans . . . or
> irresponsible individuals accepting them . . . and so on.
>
> But the crisis also needs a deeper structural analysis of how financial
> markets have changed over the past 2-3 decades -- because it is these
> changes that lie behind the current financial meltdown, particularly those
> changes associated wtih the evolution of 'new financial instruments' and
> 'vehicles' such as derivatives and private equity.
>
> And because the neoliberal edifice has been so spectacularly shaken in
> these past few onths, the crisis also provides an opportunity for the
> public to redefine what constitutes 'the public interest' and to reassert
> its claims over how finance should be managed and allocated and in whose
> interest.
>
> For the past couple of years, The Corner House and its colleagues have
> been trying to understand the impacts of the new finance on the ground --
> for instance, on communities affected by mining or plantations -- and to
> analyse what difference it might make to solidarity strategies with
> affected communities: Is capital just capital, whether it comes from hedge
> funds, private equity, banks or the state? Or does the very structure of
> this new finance create new challenges?
>
> Our work on this is still unfolding, but with the financial landscape
> changing by the day, we thought we should share with you now our analysis
> to date.
>
> So we have posted on our website two papers:
>
> -one exploring the 'shadow banking system'
>
> -the other private equity.
>
> Because events are still unfolding so rapidly, however, we are posting
> them as 'works in progress' that we aim to update as soon as we can.
>
> Within the next few weeks, we hope to post other papers on sovereign
> wealth funds, hedge funds, and the liberalisation of the banking and
> financial system that enabled the crisis to happen.
>
> We hope you find them the papers useful. Your comments and feedback are
> always welcome.
>
> best wishes from all at The Corner House
>
>
> 1)
> 'A (Crumbling) Wall of Money:
> Financial Bricolage, Derivatives and Power'
> by Nicholas Hildyard
>
> http://www.thecornerhouse.org.uk/pdf/document/WallMoneyOct08.pdf
>
> The current financial crisis is closely linked to the emergence of a
> 'shadow banking system' that financial entrepreneurs have created over the
> past 30 years. Their goal in doing so was not only to make huge profits,
> largely for themselves, but also to circumvent regulation and to offload
> risk onto others throughout the financial system.
>
> This system relied on thte creative use of 'new financial instruments' --
> in particular what are called derivatives -- that allowed financiers to
> generate easy credit by taking high risk bets while offloading the risks
> on to others.
>
> The 'wall of money' they created fuelled a boom in corporate mergers and
> acquisitions across the United States and Europe (see also private equity
> paper). It provided huge sums for companies involved in mining, biofuels,
> private health care, water supply, infrastructure and forestry to expand
> their activities.
>
> When the 'bets' began to go wrong, however, the pyramid of deals began
> tumbling down –- the bankers have certainly suffered but it is the public
> that will continue to carry the costs for many years to come.
>
> This paper explores and summarises:
>
> -how the shadow banking system was constructed and why;
>
> -the history of the derivatives, 'hedges' and speculation that underpinned
> this new finance;
>
> -how derivatives are being used to get around banking, accounting, trading
> and public finance rules;
>
> -the negative impacts on the ground even before the current crisis;
>
> -recommendations put forward in the past few months on how to fix a broken
> system; and
>
> -how best to seize the moment to pursue a different system that has a
> genuine public interest at its centre.
>
>
> 2)
> 'Taking it Private:
> Consequences of the Global Growth of Private Equity'
> by Kavaljit Singh
>
> http://www.thecornerhouse.org.uk/pdf/document/PrivateEquitySept08.pdf
>
> Private equity is now an integral component of the world's financial
> system. It was behind many of the multi-billion buyout deals, and mergers
> and acquisitions that swept across the US and Europe. Its activities have
> created a new type of corporate conglomerate that has reshaped the way
> business is conducted.
>
> As a new form of corporate ownership, private equity poses new challenges
> to labour unions, NGOs and community groups; it has a significant and
> distinctive influence on taxation policy, corporate governance, labour
> rights and public services, and thus deeply affects society, human rights
> and the environment alike.
>
> These challenges are especially clear in Asia, which has become more
> attractive for private equity firms since the 'credit crunch' diminished
> the scope for huge deals in Europe and North America.
>
> This paper looks at the global growth of private equity and its social,
> environmental and political impacts, using India as a case study of its
> growing importance in Southern countries.
>
> It concludes with an outline of private equity's vulnerabilities that may
> provide opportunities for public concerns to be addressed.
>
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