The Dark Side of NY-LON: Financial Centres and the Global Financial Crisis

Abstract

This paper brings financial centres into the debate on the causes and consequences of the global financial crisis, by focusing on New York and London. It argues that the degree of commonality, complementarity and connectivity between the two leading global financial centres justifies the use of the term ‘the New York – London axis’ (the axis). It shows that the global financial crisis 2007-9 originated to large extent in the axis rather than in an abstract space of financial markets. The dominance of the axis in global finance can be easily underestimated, and evidence suggests that contrary to expectations the axis is not in decline. Implications are drawn for the future of Asian financial centres and the global financial reform. If global finance is to change, the New York – London axis has to change. Debate on the reform has to take the reality of global financial centres seriously.

Keywords: New York, London, Asia, financial centres, financial crisis, financial reform

JEL Classification: F30, O18, R10, R51