The financial crisis that originated in the United States has developed into a serious 'once-in-a century' global crisis. A recurrence of the 1930s-type Great Depression seems to be structurally imminent. Simple 'Bubble and Burst' accounts are prevailing to explain the cause and the whole process of the crisis. Such simple arguments are not sufficient to elucidate the real dimensions of the current global crisis. It is true that structured financing contained serious institutional and systemic deficiencies, and that the collapse of the vast expansion of risk-taking financing through an unregulated and extremely high leveraged labyrinthine structured finance mechanism constituted a crucial aspect of the current global crisis. It incorporates complicated risk aversion and diversification schemes. The pricing systems are based on false assumptions that ignore Frank Knight's uncertainty about the market economy. Anyhow, it provided a major mechanism of the rapid expansion of subprime financing and "predatory" lending in the U.S. housing markets particularly in the late 2000s on the basis of historical improvements of housing and other credit segregation after the Civil Right Act and especially after the 1977 Community Reinvestment Act. Moreover, it boosted the speculative expansion of CDOs and other various type of securitized product markets in general, together with relating leveraged financing. Exacerbating sub-prime mortgage failures spreading from the early 2007 triggered the overall collapse of "risk assets" markets and led to the cumulative global financial crisis. However, one salient feature of the current crisis should be noted. The financial crisis ignited by the U.S. sub-prime crisis has proliferated quite rapidly in the global financial system and brought about a very serious interrelated contraction of the U. S and global real economy. The whole process should be grasped as the crisis of the U.S. -centered global capital accumulation regime that emerged through the global capitalism-ization of the U.S. in these two decades in response to the breakdown of the postwar Pax Americana system in the mid-1970s. The key nexus is the conjunction of the multi-layered Global City functions and the Neo-imperial circuits of global capital flow centered in the U. S., which are combined through the financial facilities in the global financial center New York, based on the US dollar as the key international currency. Globalization of business, finance and information constituted the major dynamics. Major neo-liberal re-organization of the postwar corporate system started, especially in the 1980s. Increasing volatility and instability in the currency and financial markets induced notable financial innovations and globalization, making full use of IT, under neo-liberal deregulations from the early 1980s, which has brought about Financialization of capital accumulation and Casinoization of financial markets. The process has been promoted by the neo-liberal inversion of government roles typified in the "Washington Consensus" and the parallel neo-liberal shifts of the roles of international institutions including the IMF and other international arrangements. It should be noted that this U.S. centered capital accumulation nexus has provided the major global economic growth framework not only for the U.S. but also for the rest of the world so far. The recent notable growth of the emerging economies like China or BRICs has been achieved while closely related to such key nexus. In the United States, it provided the major dynamics for the 1990s "longest" economic expansion and the conspicuous IT boom in the late 1990s. Largescale speculative risk money flooded into IT venture business, actively intermediated by New York financial markets. Typical Global City situations developed in Southern California, which provided the
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After the Asian currency crisis, the argument about the financial structure and financial markets among Asia countries was moving to the policy identification and formulation stages. The necessity for the local cooperation in a financial field spread as common recognition. Central banks and monetary authorities in the East Asia region set up strengthening bond market in the region following the first agreement of the bilateral swap arrangements in ASEAN plus 3, the Chiang Mai Initiative. This is a second comprehensive bond market program after Brady bond mainly for debt reduction in Latin America countries.
Asia countries expect bond markets to solve two mismatches (a period and currency) which were one of critical factor of financial turmoil in Asia. In order for the Asia bond market to function as markets, not only promotion of the primary bond market but also the secondary market bond to facilitate efficient price formation, timely financing.
The investors, especially institutional investors will play important role for formulation of the bond market. Japanese investor is the second biggest bond investor and the biggest in the region. But their investment to the regional bond market was limited. We outlined their heavily relied on domestic bonds' portfolios compared with other developing countries and also presented the factor of conservative investment stance for risk assets. For instance, regarding investment to the foreign bonds, Japanese institutional investors choused the bonds more than AA grade although they investment lower domestic bonds. We explained their risk evasion by five factors such as a conservative investment guideline, government control, and lack of professionals.
After bankruptcy of some Japanese big companies in 2001, risk management consciousness is uprising in investment communities. They could contribute to the current bond market program if they change their conservative stance.