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Review of "In Defense of Free Capital Markets"
By William A. Niskanen
Introduction
In Defense of Free Capital Markets: The Case Against a New International Financial Architecture
David F. DeRosa
Princeton: Bloomberg Press, 2001, 201 pp.
Foreign exchange crises convulsed much of Europe in 1992 and 1993, Mexico in 1994, much of Asia in 1997, and Russia and Brazil in 1998. Long-Term Capital Management, a major U.S. investment firm, the general partners of which included two financial economists who are Nobel laureates, collapsed in 1998. And Japan's economy has now been in the doldrums for more than a decade.
Those financial crises, in turn, led to numerous proposals for "a new international financial architecture" including proposals for controls on international capital flows, a worldwide tax on foreign exchange transactions, target bands on exchange rates, a requirement that private lenders participate financially in the restructuring of any new sovereign debt owed to them, and a new tax-financed international credit insurance corporation.
Fortunately, we now have a readable book describing those financial crises, the lessons we should have learned from them, and an evaluation of the major proposals for a new international financial architecture. David DeRosa has the right credentials for this task—a professional foreign exchange trader, an adjunct professor of finance at the Yale School of Management, and a regular columnist for Bloomberg News. Most important, for those who are mystified by financial issues, DeRosa is a disciplined analyst and a fine writer.
Full Text (PDF, 3 pages, 31 KB)