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Global Financial Crisis

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Demystifying the Financial Sector
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Despite the financial crisis and it's outgoing repercussions, the financial sector remains fundamental to most aspects of human activity. In an attempt to better understand it's inner workings, this nuts and bolts guide demystifies the world of finance and banking - from hedge funds to the money markets and derivatives. By Corporate Watch.

Download the full booklet (PDF) here.


7th February 2012 - Corporate Watch

Over the past three decades the financial system has exploded in both size and importance. This growth corresponds to a seismic shift in the organisation of society and the global economy, in which the world of banking and finance increasingly mediates every aspect of human activity. Global production, government spending, retirement savings and access to basic material necessities like food, housing and medicine are all now more than ever subject to the pressures of the financial markets. These markets now act as the central hub of an exploitative economic system which demands unlimited growth, stretching people and planet to breaking point. Despite triggering one of the worst financial crashes in history, which has sparked economic instability and recession across the globe, the power of financial institutions has not diminished, but rather increased. Furthermore, these markets play an integral role in the creation of some of the most destructive projects on earth, from the tar sands to cluster bombs to surveillance and repression technologies. Without finance, these socially, economically and environmentally harmful projects cannot proceed. It is therefore vital that we get to grips with the new financial forms that capital and the corporation have adopted.

Yet to most of us, the financial system appears impenetrable: a mess of jargon, institutions and economic theories; the rapid transmission of data across global communication networks; an alphabet soup of ever innovating financial products and strategies. It’s easy to feel bewildered by the sheer complexity of the economy, and in the face of this difficulty it becomes tempting to resort to abstract conspiracy theories or reformist solutions. But the truth about the problems of the financial sector is far more fundamental; it is not an aberrant part of the economy or a few bad apples corrupting an otherwise healthy system. Rather finance lies at the very core of contemporary capitalism and acts as the primary organising principle of a global economy driven by the single aim of profit maximisation – whatever the social and environmental cost. Moreover, whilst hedge funds, derivatives, and the bond markets might seem like intangible entities, far removed from our everyday lives, in truth they are rooted in the actions of normal people, not some secretive gang of elites. The worldwide financial system works through us, it cannot exist without the work we do, the things we buy and the debts we pay. It controls the resources we need to live and locks us into exploitative social relationships. Understanding how this happens is key to any struggle for social change.

This system can be broken down and understood: it operates through a global network of institutions, investors and agencies all trying to turn a profit from buying and selling a wide array of financial products. Once these key players and products are outlined, the pieces of the puzzle start to come together more clearly. This booklet lays out the nuts and bolts of the financial system: from hedge funds to pension funds,  investment to retail banks, commodities to derivatives, each is defined by its core activity and which other players and products it deals with. It deconstructs the world of finance in clear, simple language, with case studies and real-world examples included throughout.

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This booklet is the first publication in Corporate Watch's 'Banking on Crisis' series. The next booklet, due out it the next few months, will cover the ongoing economic crisis, its origins and history, the politics of crisis and a breakdown of some of the most common narratives used to explain the current financial meltdown. A hard copy of the booklet can be ordered here.