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What is Wrong with the Global Financial System?

Author

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  • Philip Goodchild

Abstract

In the global credit crisis of 2007–08, the financial system escaped human control and became unstable, with near-catastrophic consequences. The underlying processes driving this instability may be traced to: positive feedback between asset price inflation and increasing leverage; increasing inequity leading to insufficient consumer demand; and the clash between exponential economic growth and the scarcity of primary commodities. These expose fundamental dilemmas that structure economic activity. Since credit is a newly-created contractual relation, while debt must be repaid with money, the global economy is caught in an ever-expanding spiral of debt which, when it reaches its limits, will result in default, devaluation, and inflation.

Suggested Citation

  • Philip Goodchild, 2012. "What is Wrong with the Global Financial System?," Journal of Interdisciplinary Economics, , vol. 24(1), pages 7-28, January.
    • Handle: RePEc:sae:jinter:v:24:y:2012:i:1:p:7-28
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    Citations

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    Cited by:

    1. Alfredas Lukasevicius & Indre Lapinskaite, 2014. "Strategy of Sustainable Development in Investment Portfolio Case," European Research Studies Journal, European Research Studies Journal, vol. 0(4), pages 3-18.
    2. Othmar M. Lehner, 2014. "Finance, risk and accounting perspectives," Venture Capital, Taylor & Francis Journals, vol. 16(3), pages 185-188, July.

    More about this item

    Keywords

    Financial crisis; money; credit; resource limits; E5; G1;
    All these keywords.

    JEL classification:

    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • G1 - Financial Economics - - General Financial Markets

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