Financial Deregulation is Dead
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Financial deregulation is dead as the focus switches back to greater regulation within economies to stop the current global financial crisis occuring again.
The deregulation of the last thirty years around the world unleashed a period of unexpected economic expansion throughout the globe as financial markets were opened up, tariffs reduced or abolished, currencies unhedged to the gold price and so forth.
These changes coincided with a greater focus on reduction of risks especially within the banking industry as less capital was deployed within the banking system as banks leveraged to seek stronger return on equity through investments.
Now as the world sits on the brink of financial oblivion the spectre of greater financial regulation is well and truly back on the table.
The G20 summit to be held in November with the world’s leaders will focus on among other issues the focus of imposing financial regulation upon their respective economies. No longer is financial deregulation king but financial regulation.
Once the washup is done from this global financial crisis we can expect to see a greater focus on financial security first and foremost among global financial institutions and a tougher regulations imposed by governments to minimise the risk of this occuring again.
Chief among items likely to be discussed will be the nature of the hedge fund business and the focus on short selling by hedge funds and the likely impact this has on the confidence and performance of financial markets.
They will also discuss plans to create liquidity in markets after recent stimulus packages flagged throughout Europe and the US.
Either way expect more the talk to be about financial regulation for the next decade, not deregulation.
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