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Comments and Opinion (Recommendation)
Strict re-regulation of the financial sector in third world countries is the most important to reduce the possibilities of a incoming financial crisis like a requirement to decrease herd behavior and prevent the problems associated with too-big-to-fail institutions. On the others hand, it should be more orientated towards investment in fixed capital. Thus, third world nation should do foreign reserve accumulation and foreign exchange management in order to reduce the risks of contagion associated with external financial crisis. This is because Re-regulation of financial markets is intends to reduce herd behavior and eliminate the problems associated with too-big-to-fail institutions such as, foreign reserve accumulation and foreign exchange management to decreasing the risk of financial crises, and the adjustment of real wages in line with productivity to leveling local consumption is necessary for a sustainable recovery in developed countries. Such as the monetary policy could then reduce its focus on price stability and pay greater attention to securing low-cost finance for investment in real productive capacity. By doing so, third world countries will attain some profits and also the firm can deal with money policy that affects financial stability. In my comments, strict re-regulation should enough to strengthen up the money policy that affects the financial stability in third world country. So to say that this action wills not only improves money policy but also will bring a lot of profitable to the bank firm.
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Given the advance of private spending for boosting global need, incomes policies in the biggest economies could contribute significantly to a balanced connect together; especially when the global heals is still young. An important element of such a policy is the adjustment of real wages in line with productivity, so that local consumer can catch up in line with storage. This would also help reduce an increase in unit labor costs, and thus keep the main domestic source of inflation under control. Then this could be reduce on its focus on money policy and need to pay greater attention to securing low-cost finance for investment in main productive capacity, which truly would create new employment opportunities. Thus the money policy will at risk if the firm does not take a strict regulation especially banking firm in third world country that threat in financial stability and financial capability. In my opinion this action will made money policy is more important toward financial stability due the strict re-regulation that was made up to ensure that everything is in control by banking firm. Otherwise, banking firm will force to shut down due to regulation that too weak.
Re-regulation in financial system
Financial liberalization and deregulation was based on a spreading belief in the greater efficiency of market forces and this led to the creation of increasingly sophisticated financial instruments. Deregulation was in a plan that response to pressure from the financial sector, thus it was also part of a main trend towards less government intervention in the economy. So to speak that modern financial instruments and continued liberalization in the financial system was allowed speculative activities to expand commonly, so that gambling became an important feature of financial activities. In the mean time this will became a source of instability in many economies that threatening the entire international economic system. By contrast, it is hard to find any new financial instruments that have improved the efficiency of financial intermediation for the benefit of long-term investment in real output capacity. So to says by changing regulation, the banking firm was unsure that to obtain financial stability, as we can see the banking firm still pose threat from world financial system mechanism and hard to change especially shadow banking firm that always becoming threat to normal banking firm. So to speak that financial system is the most important role in banking firm, thus strengthen regulation in financial system will not only improves money policy but also can improves financial stability.
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Financial markets do not perform in the same way as typical markets for goods and services. When most entrepreneurs gathering in goods markets are concerned with the creation of new real assets that have the potential to rise up the productivity and improves all incomes in the future, many financial market participants are targeting concerned with the effective use of information benefits concerning existing assets. In main markets, price discovery is based on information from a multitude of independent agents who done according to their own individual preferences, and chance for profit arise from individual who take control based on the banking firm, consequences information of the market participants. In contrary, in financial markets, especially those for assets which decrease in the same broad risk line (such as, commodities and their derivatives), price change is often based on information related to a commonly observable events, or even on mathematical method that mainly use past information for making price forecasts. To improves re-regulation was launch to ensure that money policy will keep at pace. Furthermore, the banking firm should take precaution money policy re regulation will not only affect the financial stability but also affect the banking firm service too. So to say, to prevent this from happen the banking firm should provide the backup regulation so when in need; this regulation will provide cover to the banking firm. In my others opinion, re-regulation was target on to back up when something that will happen in future onward. So to say that these acts will allow banking firm to improves their lending especially against third world country that lack of regulation that will cover their money policy and financial stability.
Mitigate the consequences effect between the regular banking system and the shadow banking system.
The banking should try out by mitigating on money policy between normal banking system and shadow banking system so that they can rise up the money policy and financial stability. This can be complete by preservation and enhancement. Mitigation banks place a perpetual conservation easement on the land, with a trust fund specifically dedicated to long term management of natural resources legacy to the bank. By doing so, bank will credits from neighboring ecosystems many large landowners, including the government, are able to maintain a property in its current management state while retaining ecological functionality. Mitigation banks usually get more outcome, thus by mitigation between regular banking and shadow banking, they can improves the money policy. Mitigation banks can give out many functional business leaps on, allowing for ease of improved to a bank firm. They allow a developer to fully operational the use of a preferred development site rather than breaking up the site into sub-optimal property uses. Furthermore, mitigation bank credits are negotiated prior to research, hence prior to impact, buying credits from a mitigation bank decreases permitting time while also ensuring no net loss of habitat. The cost is often lower than other ways. Despite policies mandating no net loss of habitat value and function, agencies have had hard time to ensuring that mitigation programs are managed to this outcome. Wetlands mitigation programs, example, have in some cases been approved based on round up all of acres rather than in terms of equivalence in ecological value or operational. By doing that the bank firm compensation involves a same number of acres decrease in short time of true equivalence unless the replacement ecological functions supplied by those acres are also the similar one. In my comment mitigation between normal banking and shadow banking are good and oblivion due to both side that can conserve to each other. Otherwise mitigation also a way to improve relationship between normal banking and shadow so that both side can benefits with each others in banking firm and to money that will improves the financial stability in financial market.
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