Price-Disequilibrium Model of the International Financial Grid: Innovation, Crisis, and Off-Shore Banking

Abstract

International cash flows are involved in the process of international banking; and the modern technologies of information and communications (IC) have increased the speed, volume, and complexity of international flows. But at the end of the twentieth century, the global world began to experience destabilizing international flows -- particularly in the Asian financial crisis of 1997, Global financial crisis of 2007, and Euro crisis of 2010. In using the IC technologies, how has international banking increased the frequency and intensity of international financial crises? Did the IC technology somehow encourage the failure of international financial institutions in performing with basic financial ‘integrity’, ‘honesty’, and ‘prudence’? To answer these issues, one must observe the financial system within an IC network, a kind of financial ‘grid’. We use the concept of a ‘financial grid’ and model the grid as a network of institutional intermediaries, matching financial supply-to-demand. To construct this topological model, we review the recent history of investment banking and of the organization of off-shore banking into an unregulated but centralized international financial grid.