Stress testing the system : simulating the global consequences of the next financial crisis / Roger M. Kubarych.

Format:

Book

Author/Creator:

Kubarych, Roger M.

Contributor:

Council on Foreign Relations.

Language:

English

Subjects (All):

Foreign exchange.

International finance.

Financial crises.

Physical Description:

xviii, 187 pages : illustrations ; 23 cm

Place of Publication:

New York : Council on Foreign Relations, [2001]

Summary:

Stress Testing the System hypothesizes a fictional scenario in which a future financial crisis originates in the United States but quickly fans out to envelop financial markets around the world. The potential impacts on the global economy, on U.S. foreign relations, and on national security are played out in an intense financial " war game" with 75 current and former policymakers, market participants, and experts on finance, economics, foreign policy, and national security playing the roles of key government officials and agencies.

Contents:

Chapter I Economics and Finance at Center Stage 1

Antecedents: Military, Business, Financial 3

Guiding Principles for Constructing the Scenario 6

Organization of the Simulation 11

Chapter II Stabilizing the Financial Markets: The Focal Point of the Simulation 17

Preparing the Scenario 17

From Shock to Crisis: The Role of Accelerants 19

The Market Setting 25

At the Simulation

Part I 26

Part II: More Work to Stabilize the System 36

Monetary Policy Shifts Gears 38

The Fiscal Policy Option 40

Chapter III Mexico in Flux: Trouble in the Neighborhood 44

Real-World Backdrop 44

At the Simulation 48

Tackling the Policy Problems 48

The Control Room Perspective 49

Chapter IV Saudi Arabia Coming-of-Age: When Allies Start Going Their Own Way 51

Real-World Backdrop 51

At the Simulation 53

Tackling the Policy Problems 54

Outcome 55

The Control Room Perspective 57

Chapter V Brazilian Financial Challenge: Discriminatory Treatment against U.S. Interests 58

Real-World Backdrop 58

At the Simulation 59

Tackling the Policy Problems 61

Outcome 65

The Control Room Perspective 65

Chapter VI Argentina: Currency Board in Jeopardy 67

Real-World Backdrop 67

At the Simulation 70

The Control Room Perspective 71

Chapter VII Financial Market Fallout: SIPC Cash Crunch 74

Real-World Backdrop 74

At the Simulation 76

Tackling the Policy Problems 77

The Control Room Perspective 79

Chapter VIII Turkey and Contagion: Multiple Loyalties 81

Real-World Backdrop 81

Tackling the Policy Problems 84

The Control Room Perspective 87

Chapter IX Dangerous Contraband: Libya, Russia, and Stolen Nuclear Material 90

Real-World Backdrop 90

At the Simulation 91

Tackling the Policy Problems 92

The Control Room Perspective 96

Chapter X Plot Lines Involving China 97

Real-World Backdrop 97

Spratly Islands Incident 99

Devaluation of the Renminbi 99

Taiwan Independence Debate 101

Chapter XI Other Plot Lines: Financial Institutions in Difficulty 103

Troubled U.S. Financial Derivatives Specialist with a Parent British Insurance Company 104

Asian Conglomerate Seeks to Decapitalize U.S. Affiliate 106

German Government-Initiated Real Estate Credit Facility 108

Malaysia Seizes Partnership Shares of Private Malaysian Bank 109

Chapter XII Lessons and Implications for Policymaking 110

Reviewing the Real-World Context 110

Observations from the Simulation 115

How Best to Organize a Scenario-Based Simulation 120

Appendix B Roundtable on Financial Vulnerabilities: List of Participants and Rapporteur's Report (September 1999) 138

Appendix C Scenario-Building Roundtable: List of Participants (October 1999) 152

Appendix D Simulation Participants (January 2000) 154

Appendix E Charts of Movements in Financial Variables during the Simulation 159

Appendix F New York Conference Agenda (July 2000) 168

Appendix G Chicago Simulation Participants and Summary (September 2000) 175

Appendix H Roundtable on Lessons Learned and Policy Implications: List of Participants (November 2000) 183

Appendix I Washington, D.C., Conference Agenda (December 2000) 184.

Notes:

"A Council on Foreign Relations book"--Cover.

Includes bibliographical references.

ISBN:

0876092717

OCLC:

47140630