The Next Internet Bust? C.P. Chandrasekhar

When Facebook announced last month that it was acquiring WhatsApp for $19 billion, analysts were all asking: “What’s up?” Besides the fact that the sum was a huge price to pay for a financially small start-up, however successful it was among users of the App, it made little sense given the absence of revenues to back that valuation. This strengthened fears being expressed for the last couple of years that the world is witnessing another Internet-related bubble like the dotcom bubble of the late 1990s. There were also less visible indications of such a bubble, illustrated by firm likes Snapchat…

Is Global Finance Finally Shrinking? Jayati Ghosh

It is obvious that the recent boom in global capitalism had witnessed massive over-extension of finance. What has been described as “financialisation” reflected not only the ever-greater penetration of finance capital into more activities of the real economy and involvement in critical markets such as those for commodity futures that affect traded prices of food and fuel, but also huge and volatile movements of capital across national borders. By 2007, global stocks of financial assets (both equity and debt stocks) amounted to $206 trillion.  This meant that financial assets were more than 4 times the maximal estimate of GDP in…

Financial Convergence in Asia C.P. Chandrasekhar and Jayati Ghosh

The recent Asian experience with financial convergence suggests that financial proliferation largely facilitates new lines of business in financial services and affects the real economy more from the demand side through the debt-financed household expenditure it promotes. Thus excessive exposure to retail markets becomes a source of fragility in these countries just as it did in the developed countries. Asia (Download the full text in PDF format) (This article was originally published in the Business Line on 3 September 2012)

Debtors’ Crisis or Creditors’ Crisis? Who Pays for the European Sovereign and Subprime Mortgage Losses? Jan Kregel

In the context of the eurozone’s sovereign debt crisis and the US subprime mortgage crisis, this article looks at the question of how the losses ought to be distributed between borrowers and lenders in cases of debt resolution. The author points out that it is unlikely that debtors can fully bear the losses in a debt resolution. It is argued that the behavior and policy of creditors is just as important a factor to consider in assessing the situation. debtors_crisis (Download the full text in PDF format)