Implications of the Global Financial Crisis

Abstract

The global financial crisis has provided clear evidence that the global financial system, including that of Australia, is founded on flawed economic theories. There is no scientific justification for sophisticated risk management, complex institutional structures or intrusive regulation. Australian financial system reforms should simplify corporate structures by restoring Glass-Steagall type separation, discourage anti-competitive conglomeration, reduce system leverage and prohibit over-the-counter derivatives in regulated institutions, decrease secrecy of complex institutional regulation, and increase consumer protection through transparent disclosure of regulatory data.

Keywords: Crisis, regulation, risk, financialization

JEL Classification: G2, G28, G38, L13, L4, L51