Revisiting Systemic Risk In The Modern Global Economy

George C. Philippatos, Roger W. Clark


The economic dislocations that have brought havoc to the nexus of global economic relationships since mid 2007 have awakened our
collective conscience to the need for conceptualizing and understanding business risk transferred from the firm level to the industry, and its
eventual diffusion to national and global dimensions. This process of diffusion has created a new hybrid risk that is a synthesis of microeconomic
and systemic risk. This “micro-systemic risk” where one institutional failure can cause cascading failures across the entire economic system is the
subject of this paper. This paper proposes two different ways to restabilize the world economy. The first is building internalization structures
within companies where contracts are paid in stock or bonds in the company purchasing items. This new company will exhibit preferencing of
items in the newly partnered company. Growth will be gradual but sure. These mega companies will be regulated by international governments
with the knowledge that these companies are too big to fail and regulations shall be drafted to stop highly speculative measures.
The second is a less intrusive measure involving an automatic takeover of a bankrupt business and either restructuring or gradual winding
down of the business with the main goal being continuation of the business rather than paying off creditors.

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