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All Fall Down

Debt, Deregulation and Financial Crises

Jane D’Arista

All Fall Down traces the ways in which changes in financial structure and regulation eroded monetary control and led to historically high levels of debt relative to GDP in both developed and emerging economies. Rising stocks of debt drove the global financial system into crisis in 2008 when households, businesses, financial institutions and the public sector in some countries strained to generate sufficient income for debt service. The stagnation and fall in asset prices that followed began the process of unwinding that led to a run on the financial sector by the financial sector.
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Contents

Jane D’Arista

List of tables

Foreword by Robert Pollin

Acknowledgments

List of abbreviations

1     Introduction and summary

PART I   THE UNRAVELING OF THE 1930S-ERA FRAMEWORK

2     The euro market erodes US financial structure

3     Commercial paper guarantees and the emergence of a parallel banking system

4     ERISA moves savings into securities markets

PART II   DEREGULATION AND FINANCIAL INNOVATION CREATE THE CONTEXT FOR CRISIS

5     An overview of financial restructuring and its consequences

6     Securitization

7     Weaving the web of interconnectedness

8     Opaque markets and opaque balance sheets

9     Growing concentration leads to “too big to fail”

10    Regulating the post-crisis system

11    Mending the financial safety net for savers

PART III   THE ADVENT OF GLOBALIZATION

12    Dollar hegemony

13    Foreign exchange reserves

14    An overview of developments in global financial markets in the 1990s

PART IV   BUILDING TOWARD CRISIS IN THE GLOBAL ECONOMY

15    Concerns and warnings

16    Crises in the periphery of the global system

17    Liquidity expansion in the period before the crisis

PART V   DEBT AND THE COLLAPSE OF MONETARY CONTROL

18    The failure to halt the emergence and growth of the debt bubble

19    Rising imbalances in credit flows

20    Mounting risks of the continuing debt bubble in the new millennium

21    How eroding monetary tools facilitated debt creation

22    Monetary tools: what they are and how they function

23    The inability of capital requirements to prevent or moderate financial crises

24    How crisis reshaped the monetary toolkit

PART VI   AN AGENDA FOR MONETARY REFORM

25    Introducing a systemic approach

26    Creating a system-wide asset-based reserve system

27    Implementing policy under the current and proposed systems

28    Implications of the proposed system for the conduct of policy

PART VII   REFORMING THE PRIVATIZED INTERNATIONAL MONETARY SYSTEM

29    Can special drawing rights replace the dollar and other national currencies as a reserve asset?

30    Restructuring flows of private international investment into emerging and developing economies

31    Reforming the international payments system

PART VIII   CONCLUSION

32    Building toward crisis in the global economy—again

Bibliography

Index