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Recurring Financial Crises—The Essential Reforms

In: The Next Financial Crisis and How to Save Capitalism

Author

Listed:
  • Hossein Askari

    (George Washington University)

  • Abbas Mirakhor

    (International Centre for Education in Islamic Finance (INCEIF))

Abstract

The recent financial crisis devastated the global economy and the lives of millions of individuals and families around the world. Debt contracts are inflexible, do not accommodate sharing of risk and losses, and eventually lead to defaults and financial crises. Almost 80 years ago, Irving Fisher and other renowned economists cautioned against fractional reserve banking and the creation of money by the banking system. The application of risk sharing in corporate and public finance and a banking structure closer to 100 percent reserve banking are important as a package to reduce the likelihood of future financial crises in both the private and public sector. The powerful financial industry benefits from debt contracts, fractional reserve banking, subsidies, and preferential treatment and opposes serious reforms.

Suggested Citation

  • Hossein Askari & Abbas Mirakhor, 2015. "Recurring Financial Crises—The Essential Reforms," Palgrave Macmillan Books, in: The Next Financial Crisis and How to Save Capitalism, chapter 4, pages 47-62, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-1-137-54437-7_4
    DOI: 10.1057/9781137544377_4
    as

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