Financial Stability: Fraud, Confidence and the Wealth of Nations (Wiley Finance)

Feldkamp, Frederick L.

Applying the Lessons of History to Understanding Fraud Today and Tomorrow Financial Stability provides a roadmap by which the world can anticipate and avoid future financial disruptions. This unique discussion of past and present financial events offers new insights that explain economic, political, and legal antecedents of financial crises in Western markets. With a detailed discussion of the history of finance, this book shows modern investors and finance professionals how to learn from past successes and failures to gauge future market threats. Readers will gain new insight into the antecedents of todays financial markets and the political economy that surrounds them. Armed with this knowledge, they will be able to craft a strategy that steers away from financial disorder and toward maximum stability. Coverage includes discussion of capital, forecasting, and political reaction, and past, present, and future applications within all realms of business. The companion website offers additional data and research, providing a complete resource for those seeking a better understanding of the risk at hand. As the world struggles to emerge from the latest financial crisis, professionals in finance, the law and other disciplines, and the people they advise, are searching for understanding to avoid future crises. Financial Stability argues that the best lessons are learned from our own mistakes, and that the ability to look ahead depends upon our willingness to look back. Readers will: Review the historical laws, practices, and outcomes that shaped the modern day financial markets of the great western economies Understand the theory of financial stability, the roles of law and transparency, and the importance of action to punish fraud in order to prevent future contagion Work through the theoretical proofs in terms of math, law, accounting, economics, philosophy, and international trade Build a strategy for the future with consideration toward needs, sources, balance, and learning from past mistakes Everywhere around the globe, at all points in history, financial crises have always been rooted in the confluence of politics, finance, and law. Financial Stability puts the latest global financial crisis in perspective, highlighting the lessons we have already learned, and those we need to internalize today. Editorial Reviews From the Inside Flap The financial panic of 2007-2009 was enough to demonstrateto financial professionals and policymakers the importance oflearning from history-including recent history. Readers ofFinancial Stability will develop a firm grasp of how crisissituations developed in the past and how to use markets to gaugethe threat to the future. Financial disruption can be avoided byilluminating and removing conflicts between economic and politicalinterests. By explaining financial stability from analytic,historical, philosophical, legal, accounting, and marketperspectives, authors Frederick L. Feldkamp and R. ChristopherWhalen uncover an elegant solution to the problem of financialvolatility. From disputes described in Biblical times all the way to themost recent collapse, financial crises throughout history all havea single cause: the hidden leverage and bad debt caused by varioustypes of fraud. That is the basic claim of FinancialStability and, drawing on analysis of 27 years of data, theauthors present a remarkably compelling case. After building a firmfoundation of historical examples, they reveal a theory offinancial stability that is in some ways remarkably simple. Thetheory does not lack nuance, however, as readers will quicklydiscover as they work through the mathematical proofs inFinancial Stability. Only a few years after the Great Recession, investors havealready begun to realize that free markets have the capacity tonarrow credit spreads and stabilize equity markets. FinancialStability outlines the indisputable logic behind this fact,providing a basis from which we can responsibly provide liquidityto accommodate past errors and move forward with a firmerfooting. From the Back Cover Praise for Financial Stability "Read this book! In my 25 years of working in the fieldsof banking and financial academia, I have yet to meet a better mindfor financial markets than Fred Feldkamp. He has a rare ability tonavigate the legal, regulatory, trading, and practical elements offinancial markets with crystal clear thinking and easy tounderstand writing." -Paul Schulte, CEO, Schulte Research, AssistantProfessor of Finance at Hong Kong University and Senior Fellow atThe Fletcher School of Law and Diplomacy, Tufts University "Santayana's dictum that those who cannot rememberthe past are condemned to repeat it is never truer than when itcomes to financial history. Scams, panics, and crashes come withstartling regularity, but everyday investors fall prey to eventsevery time. Fortunately, astute readers now have a new book,Financial Stability from Chris Whalen and Fred Feldkamp,that devotes considerable space to the long history of financialchicanery of all types. The scope is impressive including ancientempires, the Bank of England, the history of U.S. banking, theGreat Depression, and more recent follies. But the book does notstop at history; it goes on to survey today's financiallandscape with a gimlet eye that looks at hidden liabilities,disappearing assets, and bubbles-in-the-making that should givesavers and investors pause. Importantly, Whalen and Feldkampseparate themselves from the doom-and gloom crowd by using harddata instead of conspiracy theories and sound analysis instead ofideological rants. They also offer concrete solutions andthoughtful policy recommendations in case any bankers orpolicymakers are still listening. Even if the elites are not payingattention, the everyday investor can benefit greatly from thescholarship and engaging style on display here. Whalen andFeldkamp's book is a tour de force and badly needed rightnow." -James Rickards, author of bestsellers The Deathof Money and Currency Wars "Isaac Newton's observations about a falling applerevealed the simple natural order from which God set the world inmotion. In this book, Feldkamp and Whalen make observations thatsimilarly touch on the natural order of commercial relations amongmen. As one of the leading U.S. finance lawyers with a forty-yearfocus on the interplay between law, accounting, and economics,Feldkamp has held a unique vantage point from which to observe howchanges in laws and rules impact markets. Feldkamp and Whalenreview the fall of the U.S. economy in 2008 and the subsequentrecovery and compare that experience against the history of marketsover 2,000 years to make observations that every governmentofficial, policy maker, lawyer, trader, accountant, economist,businessperson, and citizen needs to understand." -Michael S. Smith, Managing Partner of ChicagoOffice, Baker McKenzie

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