Show Less
You do not have access to this content

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.
Show Summary Details
You do not have access to this content

Chapter 28: Implications of the proposed system for the conduct of policy

Jane D’Arista

Extract

The proposed system restores the ability of financial institutions to borrow and lend reserves and reduces pressure on asset sales. Unlike other financial assets and liabilities, reserves held with the Fed retain their face value and their use in transactions among financial institutions would preserve confidence. More importantly, unlike capital, their ability to be created and extinguished by the Fed would restore its ability to be an effective systemic lender of last resort. In addition, the new system would allow the Fed to constrain or stimulate flows to specific asset types or financial sectors and thus deal more effectively with asset bubbles and credit crunches. It could also buy foreign securities in repo operations to moderate the effects of excessive capital inflows. Ensuring that the Fed has these and other monetary powers would restore its ability to meet its mandate to provide the stability needed to enhance the nation’s macroeconomic performance.

You are not authenticated to view the full text of this chapter or article.

Elgaronline requires a subscription or purchase to access the full text of books or journals. Please login through your library system or with your personal username and password on the homepage.

Non-subscribers can freely search the site, view abstracts/ extracts and download selected front matter and introductory chapters for personal use.

Your library may not have purchased all subject areas. If you are authenticated and think you should have access to this title, please contact your librarian.


Further information

or login to access all content.