Beyond the global financial crisis: central banking in a new global financial system

Since the outbreak of the global crisis in mid 2007, there has been an extensive discussion on root causes. Some blame the greed and corruption of financial actors. Others put the blame on central bankers for easy money or regulators who remained idle as too much risks accumulated in financial markets. According to advanced economies, global imbalances have been caused by emerging surplus countries that keep their currency undervalued and their domestic consumption restricted. It is unfortunate that all these arguments and counter arguments, which may be valid in their own way, prevents a more general discussion on the deep-seated conflicts and contradictions in the global economic, social and political paradigm upon which the world order is built. To put it another way, the problems we face today do not arise from some operational failures, but from the system itself and the underlying philosophical framework. In fact this is a crisis of three main pillars of our existing system: the crisis of the economic theory, the crisis of the globalization, and the crisis of market based financial system.