LORENZO BINI SMAGHI

Who Shall Save us from the next International Financial Crisis?

Mexico in 1995, the South East Asian countries in 1997, Russia and Brazil in 1998: the rate at which international financial crises occur is starting to be a concern. This is destabilising both for our savings and the world's entire economy. What are financial crises caused by? How can they be prevented and solved? In a clear and concise manner this book examines the main causes of international financial crises and the way to reduce them. As savers in industrialised countries take more and more risks capital tends to flow towards developing nations in the search for more profitable investments. This allows these countries to develop more quickly. However their financial structures are still fragile. At the first signs of a setback the stock markets begin to tremor, financial agents go bankrupt, stock prices plunge and the currency is devaluated. Shock waves soon reach all the main stock exchanges. The main solution would be to strengthen the financial systems of developing countries, but also in industrialised nations where there are mediators who are often beyond the regulations and whose size are a source of potential instability for the stock markets. When a financial crisis arises international financial institutes rush to help the country in question to resolve the emergency, but often than not they do not have adequate instruments and enough financial resources to intervene effectively. Only the seven most industrialised countries in the world are capable under the leadership of the United States to reestablish stability.

Lorenzo Bini Smaghi is a top Civil Servant for International Affairs at the Italian Treasury Ministry.

series "Contemporanea"
pp. 192, 978-88-15-07343-3
publication year 2000