Tuesday, May 5, 2009

Free markets boost economies and raise global prosperity

Globalization and prosperity are synonyms for the free movement of goods, people, and capital around the world. While this is something easy enough to understand, it's equally important to be aware of the downside effects when international imbalances take place. Although Cédric Tille's paper tackles the Swiss banks, it's an insightful tale about how global finance operates.

What are Switzerland’s vulnerabilities?
Cédric Tille © voxEU.org
12 March 2009

The biggest risk facing the Swiss economy is its large financial sector with substantial international exposure. Foreign currencies, mostly held by UBS and Credit Suisse, account for nearly two-thirds of banks’ balance sheets - an amount equivalent to four times annual GDP. This column suggests splitting the two large banks’ domestic and foreign operations, so that losses on the latter do not jeopardize the domestic financial system.
Read the article here.

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