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Cameron Stockman

The psychology of money part two — the speculative episode

Bankers, policy makers, and investors are still dealing with the paradigm shift that the “great recession” of 2008-09 imposed upon most of the economies and politics of the industrialized nations around the world. In dealing with the aftermath of one of the most serious and systemic crises our modern world economy has faced, we’ve seen the struggle to de-leverage continue through many large financial institutions, and now expand to many domestic governments. This process of adjustment to the new global financial environment has led many governments to begin a process of regulation, enacting legislation both global and domestic in scope in an attempt to limit or interpret the kind of activity that could cause another global systemic breakdown of credit and confidence.Repercussions that erupted from the great recession have been swift and ground-breaking, changing the status-quo of banking limitations and financier accountability. Supporters of legislation like the Frank-Dodd act in the United States, and the international accord Basel 3, believed that lack of regulation in the financial sector was a main prerequisite for the failure of the system. In some ways they’re correct, the lack of a strong regulatory body and harmonized legislation allowed for the creation of strong regulatory arbitrage between countries. However, placing the blame primarily on this one issue disregards many other “perfect storm” factors, that in combination allowed for a strong systemic failure of the banking and financial system. As in most crises, blame has been thrown about in many directions attempting to find a scapegoat so  the rest of the system can escape without any question. As regulation has become the focal point of re-shaping our financial system, we’ve missed the opportunity to take a real look at the incentives and basic human behaviour that’s driven the world economy of the railroad tracks more that… Read More

Europe’s edges are crumbling

Policy makers in the European Union, and more importantly within the European Central Bank (ECB), are scrambling to find a policy solution to the increasingly tense situation regarding the PIIGS (Portugal, Ireland, Italy, Greece, and Spain). Over the last year, and more directly over the last two months, leaders within the EU have been attempting to find a suitable solution of how to alleviate the pressure on the servicing of these countries’ sovereign debt.The political and economic tensions within the EU have been strung tight over the debated issue of to what degree the other member nations should and will pay for the PIIGS’s accounting disaster. So far the requests of Ireland and Greece for a sovereign bailout have been approved with much deliberation. The temporary 750 billion-euro ($1.1 trillion) European Financial Stability Facility is forming the lion’s share of the bailout money being used.What the EU is lacking, is a long-term stability mechanism that can act as the lender-of-last resort for the currency in times of need. The monetary union has often faced issues of accountability and has had to embrace the prevalence of free-riding from a number of member nations. When the European Stability Mechanism (ESM) eventually replaces the temporary EFSF, leaders of Europe are hoping that this institution can fill this important role.The problem is, with the replacement of the current Fund by the ESM, new bailout loan rules will also replace the negotiated terms that have already been made during this crisis. Essentially with the inaction of the ESM, sovereign-debt restructuring is a potential pre-condition to borrowing from the future ESM and the unsecured government debt will be subordinated to ESM loans (as argued by Standard & Poor’s).These fears have lead Standard and Poor’s to downgrade Greece and Portugal’s government debt on the basis that these… Read More

The Political Economy of the Arab Revolutions

The political developments that have been and still are taking place in the Arab world has drawn global media attention as an unprecedented change in socio-political relationships has begun to occur. Although much emphasis has been placed on the evolving political ties that the West will have to develop and nurture over the coming months and years, little emphasis has been placed on the structural and speculative changes that have taken place in the international stock markets and world economy.Since the fall of the Tunisian despot Ben-Ali, there has been a snowball effect that has continued to gain momentum as it spread east through Egypt, and now is seemingly affecting Yemen, Algeria, Syria, Bahrain, and Iran. This pan-Arab region has been historically one of the slowest to adjust to political evolution, and the quick and forceful social forces that are emerging in the region have been able to take root in a number of critical states never before seen to be able to manage such structural dynamism.With the fall of Mubarak in Egypt, we are left to wonder what kind of regime will be instituted within the former military-dictatorship that was in place for over 30 years. Much emphasis has been placed on the apparent fundamentalist mentality that has crept into the social movement under the direction of the “Muslim Brotherhood”. But so far this fear of a more fundamentalist Egypt has yet to have taken any true form. If the social forces that began the Egyptian revolution stay true to the beliefs that propagated such an unprecedented change, there should be little worry as to the face of the new regime within Egypt.Egypt’s economy has been put on hold in the last few weeks; banks are acting on limited hours, the stock exchange has been closed, and all governmental… Read More