A Quote by Wen Jiabao
Inappropriate macro economic policies in some economies, characterised by [a] low savings rate and high consumption [and] failure of financial supervision and regulation to keep up with innovation which allowed financial derivatives to spread.
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What is important is that in a capital-scarce country like India, the real interest rate needs to be positive enough to encourage healthy growth of financial savings; we get into macro difficulties when real rates on financial savings become negative for a length of time.
The financial crisis involved significant failures in the functioning, regulation, and supervision of OTC derivatives markets.
But our system of regulation must keep up with this. If it fails to keep up, it will hold back economic expansion. We need financial market regulation that works at national and European level.
Efforts to promote financial stability through adjustments in interest rates would increase the volatility of inflation and employment. As a result, I believe a macro-prudential approach to supervision and regulation needs to play the primary role.
For market discipline to constrain risk effectively, financial institutions must be allowed to fail. Under optimal financial regulatory and financial system infrastructures, such a failure would not threaten the overall system.
From the 1990s onward, the financial sector created a vast array of instruments designed to separate investors from their money, financial derivatives of an ever-increasing level of complexity. At some point, this complexity reached a point where even the creators of the derivatives themselves didn't understand them.
The use of a growing array of derivatives and the related application of more-sophisticated approaches to measuring and managing risk are key factors underpinning the greater resilience of our largest financial institutions... Derivatives have permitted the unbundling of financial risks.
It's clear that there has to be some play between the vitality of invention in economic life and some regulation of it, and in some ways the great ideological wars of the 20th century that cost so many lives had to do with whether to have managed economies directed by government or economies directed by the free movement of capital, which is only partially subject to government regulation.
The subprime disaster was a result of financial bombs - derivatives - exploding in financial institutions such as AIG and Lehman Brothers, as well as banks and financial institutions throughout the world.
The financial sector is vital to the economy. A well-functioning financial sector promotes job creation, innovation, and inclusive economic growth.
Wars have economies. And I don't mean financial economies, although that's often part of it. Why do people continue fighting these wars? There are financial incentives.
Financial innovation is an oxymoron. It's very rare that there is something that's actually financial innovation. It's a euphemism for hiding leverage.
Too often, we make budget cuts - then blow the savings. Instead, think about your financial picture. Do you have high-interest rate debt? Paying it off faster will save you a bundle.
North Carolina is home to some of the largest financial institutions in the country, and a vibrant network of community banks. We're a banking state, and we're proud of that distinction. But we also understand that responsible financial regulation protects consumers and businesses.
Fundamentally, the solution to economic insecurity is economic prosperity - an achievable goal. But for anyone who has grown up without financial security, there's a shadow that lies over even those who move towards independence: lack of financial literacy.
This crisis exposed very significant problems in the financial systems of the United States and some other major economies. Innovation got too far out in front of the knowledge of risk.
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