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Book Cover
E-book
Author Higgins, Karen L.

Title Financial whirlpools : a systems story of the great global recession / by Karen L. Higgins
Published Kidlington, Oxford, UK : Academic Press, ©2013

Copies

Description 1 online resource (xxxviii, 360 pages) : illustrations
Contents pt. 1. Foundations -- pt. 2. The yin: human behaviors -- pt. 3. The yang: economic mechanisms -- pt. 4. Yin and yang: integration
Machine generated contents note: pt. I Foundations -- 1. Lines or Circles: The Basics of Systems Thinking -- 1.1.A Brief History of Systems Thinking -- 1.2. Application and Relevance of Systems Thinking -- 1.3. Linear Thinking and Systems Thinking -- 1.4.Complexity Economics and Systems Thinking -- 1.5. Systems Thinking Concepts -- 1.6. Loops -- 1.6.1. Feedback Processes -- 1.6.1.1. Reinforcing Feedback -- 1.6.1.2. Balancing Feedback -- 1.6.2. Feed-Forward Processes -- 1.7. Lags: Time Delays -- 1.8. Limits to Growth -- 1.8.1.S-Shaped Growth -- 1.8.2. Overshoot and Col lapse -- 1.9. Levers: Points of Power -- 1.10. Visualization Tools -- 1.10.1. Behavior-over-Time Graphs -- 1.10.2. Causal Loop Diagrams -- 1.10.3. Balancing Feedback Loop -- 1.10.4. Balancing Feedback Loop with Delays -- 1.10.5. Reinforcing Feedback and Feed-Forward Loops -- 1.10.6. Limits to Growth -- 1.10.6.1.S-Shaped Growth -- 1.10.6.2. Overshoot and Collapse -- 1.11. System Boundaries -- 1.12. Systems Thinking Philosophy -- 1.13. Summary -- 2. As the Gears Turn: Policies, Practices, Markets, and Risk -- 2.1. Timeline -- 2.2. Federal Economic Policies -- 2.2.1. Monetary Policy -- 2.2.1.1. Interest Rates -- 2.2.1.2. Inflation Targets -- 2.2.1.3. Delays and Other Forces -- 2.2.2. Housing Policies -- 2.3. Home Mortgage Lending Practices -- 2.3.1. Lending Strategies -- 2.3.1.1. Relaxed Standards -- 2.3.1.2. More Loans to Higher-Risk Borrowers -- 2.3.2. Types of Loans -- 2.4. Markets and Human Behavior -- 2.5. Housing Market -- 2.6. Financial Market -- 2.6.1. Securitization: Mortgage-Backed Securities -- 2.6.2. Structuring: Collateralized Debt Obligations -- 2.6.3. Derivatives: Credit Default Swaps -- 2.7. Risk -- 2.8. Systems Interpretation -- 2.8.1. Balancing Loop for Monetary Policy -- 2.8.2. Balancing Loops for Housing Supply and Demand -- 2.8.3. Influence of the Housing Market on Securities and Derivatives -- 2.8.4. Candidate Leverage Points -- 2.8.5. Current Activities -- 2.8.6. Cautions -- 2.9. Summary -- pt. II The Yin: Human Behaviors -- 3. Where Can I Buy One? Humans and the Economy -- 3.1. History of Human Psychology in Economic Theory -- 3.1.1. Behavioral Economics -- 3.1.2. Neuroeconomics -- 3.2. The Role of Values and Beliefs in Economics -- 3.3. The Role of Expectations in Economics -- 3.4. The Role of Human Nature in Economics -- 3.5. Summary -- 4. Who Are You Anyway? Values, Beliefs, Norms, and Behaviors -- 4.1. American Culture -- 4.1.1. Value Patterns -- 4.1.1.1. Entitlement to Success -- 4.1.1.2. Entitlement to Material Comfort -- 4.1.1.3. Entitlement to Equality -- 4.1.1.4. Entitlement to Property -- 4.1.2. Beliefs -- 4.1.2.1. The American Dream -- 4.1.2.2. Consumeritis -- 4.1.2.3. Consumer Credit is Mine -- 4.2. Corporate Cultures -- 4.3. Systems Thinking Interpretation -- 4.3.1. Candidate Leverage Points -- 4.3.1.1. Alternate Beliefs -- 4.3.1.2. Leaders' Influence on Corporate Culture -- 4.3.2. Current Activities -- 4.4. Summary -- 5. Visions of Grandeur: Expectations and Behaviors -- 5.1. Expectations and the Economic Environment -- 5.1.1. Confidence Levels -- 5.1.2. Effects of the Environment on Expectations -- 5.1.3. Environment before the Crisis -- 5.1.4. Expectations before the Crisis -- 5.1.4.1. Expectation One: Current Economic Conditions Will Continue Indefinitely -- 5.1.4.2. Expectation Two: Housing Prices are Rising so I'd Better Buy Now -- 5.1.4.3. Expectation Three: My Financial Security is Permanent, so I Can Afford to Spend Money -- 5.1.4.4. Expectation Four: Because Others are Doing it, it Must Be Good, so I Will Do it Too -- 5.1.4.5. Expectation Five: My Success Will Continue because I'm Good and I'm Lucky -- 5.1.4.6. Expectation Six: I'll Be Able to Manage My Loan Payments Even Better in the Future -- 5.1.4.7. Expectation Seven (for mortgage lenders and sellers of mortgage-related securities): Borrowers Will Not Default on Home Loans -- 5.2. Systems Thinking Interpretation -- 5.2.1. Expectation Reinforcing Feed-Forward Loop -- 5.2.2. Demand Reinforcing Feedback Loop -- 5.2.3. Candidate Leverage Points -- 5.2.3.1. Demand Leverage -- 5.2.3.2. Expectations Leverage -- 5.2.4. Current Activities -- 5.3. Summary -- 6.A Crisis of Human Proportions: Ethics and Behaviors -- 6.1. Mortgage Fraud -- 6.1.1. Fraud for Housing -- 6.1.2. Fraud for Profit -- 6.2. Disreputable Lending -- 6.2.1. Misleading Loan Descriptions -- 6.2.2. Liar Loans -- 6.3. Shady Corporate Strategy -- 6.3.1. Lofty Goals -- 6.3.2. Devious Tactics and Tantalizing Incentives -- 6.4. Deceitful Dealings -- 6.4.1. Corporate Fraud -- 6.4.2. Securities Fraud -- 6.4.2.1. Inappropriate Ratings -- 6.4.2.2. Collusion for Volume -- 6.4.2.3. Poor and Misleading Information -- 6.4.3. Ego-Driven Behaviors -- 6.5. Systems Thinking Interpretation -- 6.6. Summary -- 7. Self Speaks Loudly and Carries a Big Stick: Sources of Unethical Behavior
7.1. Ethics and Its Purpose -- 7.2. Ethical Issue: Self-Interest Versus Social Interest -- 7.3. Human Nature Traits of Self-Interest -- 7.3.1. Survival -- 7.3.2. Significance -- 7.3.3. Belonging -- 7.3.4. Pleasure -- 7.4. Societal Needs -- 7.5. Economic Environment -- 7.6. Repositories of Moral Grounding -- 7.6.1. Moral Values -- 7.6.2. American Culture -- 7.6.3. Corporate Cultures -- 7.6.4. Wall Street Culture -- 7.7. Concern About Consequences -- 7.7.1. Secrecy -- 7.7.2. Disregard -- 7.8. Greed and Hubris -- 7.9. Short-Term Narrow-Focused Rewards -- 7.10. Historic Precedence -- 7.11. Systems Thinking Interpretation -- 7.11.1. Candidate Leverage Point -- 7.11.2. Current Activities -- 7.12. Summary -- pt. III The Yang: Economic Mechanisms -- 8. What Goes Up Must Come Down: The Housing Bubble -- 8.1. Bubble History -- 8.2. The Rise and Fall of the Housing Bubble -- 8.3. Affordability and the Housing Bubble -- 8.4. Supply, Demand, and the Housing Bubble -- 8.4.1. Demand Indicators -- 8.4.2. Supply Indicators -- 8.4.3. Housing Bubble Behavior: 2000 to 2006 -- 8.4.4. Housing Bubble Behavior: 2006 to 2008 -- 8.4.5. Housing Bubble Behavior: 2008 to 2010 -- 8.5. Reasons for Supply and Demand Shifts -- 8.5.1. Inflation -- 8.5.2. Income -- 8.5.3. Monetary Policy -- 8.5.4. Other Forces -- 8.5.4.1. Shift in Demand: Consumer Expectation -- 8.5.4.2. Shift in Demand: Financial Resources and Availability of Credit -- 8.5.4.3. Shift in Supply: Expectation of Builders -- 8.5.4.4. Shift in Supply: Unanticipated Influx of Homes for Sale -- 8.6. Supply and Demand Shift Synopsis -- 8.7. Systems Thinking Interpretation -- 8.7.1. Stability -- 8.7.2. Growth -- 8.7.3. Decline -- 8.7.4. Candidate Leverage Points -- 8.8. Summary -- 9. On Top of Debt Mountain: High-Risk Loans and Credit -- 9.1. Journey Segment One: Easy Availability of Credit -- 9.1.1. Policies and Incentives for Home Buying -- 9.1.2.Competition for Mortgage Loan Market -- 9.1.3. Expanded Securitization of Subprime Loans -- 9.1.4. Convergence of Pressure for Easy Credit -- 9.2. Journey Segment Two: High-Risk Loans -- 9.2.1. Subprime and ARM Loans -- 9.2.2. Growth of Risk -- 9.3. Journey Segment Three: Accumulation of Debt -- 9.3.1. Home Ownership Loans -- 9.3.2. Home Equity Loans -- 9.3.3. Consumer Credit -- 9.3.4. Systems Description of Debt Growth -- 9.3.5. Weakened Limits for Debt -- 9.4. Journey Segment Four: Defaults, Bankruptcies, and Foreclosures -- 9.4.1. Waves of Loan Defaults -- 9.4.2. Transition from Default to Delinquency and Foreclosure -- 9.5. Systems Thinking Interpretation -- 9.5.1. Housing Bubble and Debt Dynamics -- 9.5.2. Debt, Defaults, Bankruptcies, and Foreclosures -- 9.5.3. Foreclosures, Expectations, and Housing Prices -- 9.5.4. Foreclosures and Supply -- 9.5.5. The Housing Bubble Inflates -- 9.5.6. The Housing Bubble Bursts -- 9.5.6.1. Overshoot-and-Col lapse of Debt -- 9.5.6.2. Overshoot-and-Col lapse of Expectation -- 9.5.6.3. Overshoot-and-Col lapse of Housing Prices -- 9.5.7. Future Forecast -- 9.5.7.1. Shadow Inventory -- 9.5.7.2. Erosion of Capacity for Economic Growth -- 9.5.8. Candidate Leverage Points -- 9.5.8.1. Leverage to Dampen Growth of Housing Prices and Risky Debt -- 9.5.8.2. Leverage to Slow Decay -- 9.5.9. Current Activities -- 9.6. Summary -- 10. The Risk Tiger Pounces: Financial Market, Risk, and Securitization -- 10.1. Securitization, Structuring, and Derivatives in the Financial Market -- 10.1.1. The Money-Making Machine -- 10.1.2. Risk Multipliers -- 10.1.3. Securities Issuers -- 10.1.3.1. Volume of Mortgage-Backed Securities -- 10.1.3.2. Volume of Collateralized Debt Obligations -- 10.1.3.3. Other Risk Multipliers from Securities Sellers -- 10.1.4. CDS Sellers -- 10.1.5. Federal Government -- 10.1.6. Rating Agencies -- 10.1.7. Financial Organizations -- 10.2. Systems Thinking Interpretation -- 10.2.1. Defaults in the Financial Market -- 10.2.2. Consequences -- 10.2.3. Systems Integration of Loans, Securities, and Derivatives -- 10.2.4. Candidate Leverage Points -- 10.2.5. Current Activities -- 10.3. Summary -- pt. IV Yin and Yang: Integration -- 11. Human Roots Are Deep: Yin Meets Yang -- 11.1. Expectations -- 11.2. Self-Interest and Social Interest -- 11.2.1. Moral Grounding -- 11.2.2. Awareness -- 11.2.3. Human Defense Mechanisms -- 11.2.4. Short-Term Narrow-Focused Rewards -- 11.3. Material Desires -- 11.4. Greed -- 11.5. Economic Environment -- 11.6. Search for Meaning -- 11.7. Systems Thinking Interpretation -- 11.7.1. Integrating Self-Interest and Social Interest with Debt Dynamics -- 11.7.2. Integrating Greed, Ethics, and Consequences -- 11.7.3. Integrating the Housing and Financial Markets -- 11.7.4. Candidate Leverage Points -- 11.7.4.1. Category 1: Expand Awareness of Consequences -- 11.7.4.2. Category 2: Harness Corporate Influence -- 11.7.5. Integrating Human-Related Levers -- 11.7.6. Current Activities -- 11.7.6.1. Self-Interest -- 11.7.6.2. Concern about Consequences and Social Interest -- 11.8. Summary
12. It's a Small World After All: Global Implications and the Road Ahead -- 12.1. Economic Truths About the Crisis -- 12.2. Summary of Crisis Dynamics -- 12.3. An Expanded Systems Perspective -- 12.3.1. Reinforcing and Balancing Loops -- 12.3.2. External Influences -- 12.3.3. Outputs -- 12.3.4. Global System Interactions. 12.3.4.1. Monetary Policy Balancing Loop -- 12.3.4.2. National Economic Health Reinforcing Loop -- 12.3.4.3. International Economic Health Reinforcing Loop -- 12.4. Conclusions from the Expanded Systems View -- 12.4.1. Leverage Areas, Potential Pitfalls, and Recommended Actions -- 12.4.1.1. Area 1: Limit High-Risk Debt -- 12.4.1.2. Area 2: Reform the Market for Securities and Derivatives -- 12.4.1.3. Area 3: Decrease Unethical Behavior -- 12.4.1.4. Area 4: Apply Positive Motivation -- 12.4.1.5. Area 5: Maintain Confidence in the Economy -- 12.4.2. Strategic Leverage -- 12.5. Systems Thinking as a Tool -- 12.5.1. Balance -- 12.5.2. Lag -- 12.5.3. Interdependence -- 12.5.4. Limits -- 12.6. Effectiveness of Current Economic Policies -- 12.6.1. Philosophy Behind Current Actions -- 12.6.2. Are Current Actions Enough? -- 12.7. Yin and Yang Reprise -- 12.8. Implications for the Future -- 12.9. Concluding Remarks
Summary "How do economists reconcile their expertise with their failures to predict and manage the 2008 financial crisis? This book goes a long way toward an answer by using systems theory to reveal the complex interdependence of factors and forces behind the crisis. In her fully integrated view of the economy, how it works, and how the economic crisis burst, Karen Higgins combines human psychology, cultural values, and belief formation with descriptions of the ways banks and markets succeed and fail. In each chapter she introduces themes from financial crisis literature and brings a systems-theory treatment of them. Her methodology and visual presentations both develop the tools of systems theory and apply these tools to the financial crisis. Not just another volume about the crisis, this book challenges the status quo through its unique multidisciplinary approach."--Publisher's website
Bibliography Includes bibliographical references and index
Notes Print version record
Subject Global Financial Crisis, 2008-2009.
System theory.
Systems Theory
Economic Recession
BUSINESS & ECONOMICS -- Economic History.
System theory
Form Electronic book
ISBN 9780124059214
012405921X