Summery of Globalization, Politics, and Financial Turmoil economic Essay

Summery of Globalization, Politics, and Financial Turmoil economic - Essay Example experience such crises mainly because there is a breakdown in communication between the chief executive of the monetary authority and financial officers in such times, leading to insufficient banking regulations and eventually flight of capital out of the country, which then has a snowballing effect. For the purpose, Satyanath elaborates on three bodies of literature – 1) globalization of capital and the political scenario in which there are possibilities of miscommunication 2) the presence of ill-informed chief executive and 3) the existence of veto players, that is, those whose consent is necessary for any policy change. Prior to the 1980s, all developing countries had relatively stringent regulations on capital inflows and outflows. All foreign exchange transactions were strictly monitored and banks had limits on overseas borrowings. From the 1980s, the International Monetary Fund (IMF) began to put pressures on the developing countries to liberalize the financial sectors, justifying that the access to foreign capital would allow these countries to invest more than the domestic savings allowed them to. Besides, short-term cyclical recessions could be balanced with countercyclical capital inflows from overseas. Also, free mobility of capital would also allow domestic investors to invest abroad thus neutralizing domestic shocks while also allowing them to earn higher risk-adjusted returns. Lastly, the dismantling of the bureaucratic shackles would allow the financial sectors of the developing countries become more professional, the IMF argued. Consequently, many Asian countries liberalized the capita l accounts as they did the trade accounts in the 1980s and 1990s, and the result was higher growth rates in Gross Domestic Product in the immediately succeeding years. However, by 1996, many of these same economies began to show signs of slower growth. Simultaneously, what disturbed the analysts were the growing current account deficits and increase in foreign

The Raj Rajaratnam's Conspiracy And Securities Fraud Essay - 19

The Raj Rajaratnam's Conspiracy And Securities Fraud - Essay Example Rajaratnam had a continuous pattern of using insider trading to make millions of dollars in profits. Typically insider trading occurs as one time tips that a person exploits. A smart insider trader will not abuse his knowledge to earn money to stay off the radar of the Securities and Exchange Commission (SEC). Greed was the primary factor that led to the demise of Raj Rajaratnam. Information asymmetry in the financial market is a posing great risk. This risk is characteristic of insider trading activities. These activities and underground operations are tailored towards benefiting a few in the society. Considering the Galleon insider trading saga, the parties that were set to benefit from illegal activities are few. Investors and more especially the hedgers should have common information regarding market share movements of companies (Jones, 1996, pg. 143). However, a few individuals through cooperation and collaboration sought to take advantage of crucial information only available to them. Of course, an inside job is a context upon which the participants to these fraudulent activities thrived and thereby succeeded in their quest to reap huge profits by taking advantage of company performance in the financial market (Girgenti, 2010, pg. 88). Kamal Ahmed among other senior employees of companies listed in the investigations offered crucial information on payment. Such an activity is risky for the financial markets because information symmetry is expected to influence the decisions of investors. Acts of corruption and bribery are therefore integrated into the insider trading activity allowing for the few involved to take advantage of the entire shareholding and investing community. The losses of many are the profits of a few. Due to the high secrecy that insider trading activities require, it seems obvious that successful businessmen and prominent people may be the major participants in such activities.