Fixing the Weakness Inherent in the Financial System

Necessity of Return to Separation of Commercial and Investment Banking

As the world economy seems to hurtle towards yet another recession, more and more, economists are lamenting the state of the world’s financial system, are lambasting the fact that 10 years subsequent to the financial meltdown of 2008, the world’s financial system is no more sounder today than it was prior to that monumental meltdown.

When Mathematics is done right, Mathematics don’t lie, always is truth; tis the reason some refer to Mathematics as the ‘Language of God’. In Financial Economics, there exist some stylized facts that are rooted in Mathematics.

Whenever Mathematics is done right, it’s predictions are inviolate, hence, it’s characterization as ‘Language of God’.

An important stylized fact of Financial Economics is what is referred to as Multiplier Effects. Whenever US$1 is, by virtue of activities in the real sector, transformed, via generation of returns on real activities, such as Manufacturing, Operation of a Restaurant, Farming etc., into US$1(1+r), where r is the return on investment, a return is generated, but there is not as yet any Multiplier Effect in an economy.