FINANCIAL BODIES: STAGNATION OR ECONOMIC DEVELOPMENT FOR A

COUNTRY?

Since ancient times, bank notes have been inmerse within our needs, since
the ancient Mesopotamia, throughout the Roman and Greek Empires and
especially in China and India.

In those times it was necessary for an organ to commit to the role of looking
after the money and to borrow money to realize diverse operations. As time
passed, they saw the need to operate with wider functions using sufficient
recourses that were able to finance the ideas and projects of the society due
to the great quantity of people who requested this service.

Throughout time, its growth and expansion was so big that they acquired an
economic, politic and social power, so much that in actuality you can find
banks which not only work within their respective countries but expand their
services to other places as these services were growingly required by the
world population, this produced a primary necessity in the services in order
to materialize the dreams of many people. engineers of finance make more
money than real engineers because they dont build bridges THEY BUILD
DREAMS.

In actuality it has been evidenced that the power that the banks have over
the economies can generate poverty (financial crisis), like it can wealth,
which can lead to the loss of great quantities of money caused by an
unorganized system.

With this said, its necessary to ask the question: in what way can the
financial bodies drive a country to a stall if they supposedly have to commit
to the developmental objectives?

The response to this seems simple but, in reality, it presents great

complexity and, due to such, errors.

A more recent case was the one that occurred in Iceland, a prosperous
economy which grew normally at 20% unemployment very low, one day the
local bankers decided to eliminate its policy of deregulation which permitted
foreign investments without any control with the purpose of generating a lot
of industrial development, well this policy lead the country to the brink of
bankruptcy with losses of 10 times the amount of their GDP and as a
consequence seeing the privatization of their three principal banks and
generating crisis for many years.
The case which was most well known and most impactful to the global
economy took place in the United States in the year 2008, but this disaster
had been growing since the 80s.

The problem commences when the banks pay mortgages higher than what
was normal at the time, without caring about whether the person to which
they lent money to had the ability to pay it back, this was done because they
joined with other types of lends and formed denominated CDOs which were
sold to the investors as secure because the raters of high quality like
Moodys, Standard and Poors y Fitch gave high qualification to these
investments in exchange of great quantities of money for showing good
qualifications.

While billions of these CDOs were being sold, insurance companies created
CDSs as a way of insuring these investments, but they didnt count on
regulation for the development of this activity and trusted only in the score
that the raters gave to them. This lack of regulation made way for the gap
which allowed the insuring of an investment multiple times by different
people, even non-owners. The financial entities knew that they were risky
investments and at the same time boosted the sales of these investments.
After al this process, investment banks one by one were brought to
bankruptcy by their own decision while the fraud that was committed be out
in the light without intervention. In this way, filing for bankruptcy didnt
mean they had to indemnify or pay for the operations being realized and
they were permitted to keep all the money that they made fraudulently.

Due to this, the banks have always wished to be big, because that way if
they have any problems the government comes in to helps them due to the
inference they could have over the whole economic system, so the banks
take advantage of this on occasion like it occurred in the Unites States. With
the purpose of preventing this, a policy of financial security should be
developed at an international level, where the principal governmental entity
enforces restrictions to keep the financial sector in order and monitored in a
way that permits investments that are completely secure and, instead of a
crisis, generates a permanent development.