Eric Helleiner of Understanding the 2007-2008 Global...

Eric Helleiner of Understanding the 2007-2008 Global Financial Crisis: Lessons for Scholars of International Political Economy argues that the IPE scholars of the years leading into the financial crisis of 2007 failed to identify the negatives of international capital flows which in turn increased the United States financial bubble. Helleiner argues that IPE scholars could not have predicted the event precisely in regards to timing, but failed to observe obvious problems that came with amplified securitization and increased levels of risk taking within the market. Events leading up to the financial crisis of 2007 began with the increase of housing bubbles and the growth of default mortgages, mostly subprime mortgages. These defaults†¦show more content†¦International causes of the crisis came with large inflows of foreign capital that created cheap cost credit in the U.S. contributing to financial bubbles, excessive debt accumulation and the pursuit of risky investments. In turn, the crisis came as a result of too much foreign investment in the U.S. rather than too little. Helleiner argues IPE scholars failed to connect the relationship of foreign capital generating bubbles within the U.S. as focus was set more on its affect in developing countries. However worldwide, many foreign nations came in support of the U.S. often private investors from high-income countries with increased account surpluses. It is believed the U.S. structural position in the global market lead to backings from countries like that of China whose goals were to p romote rapid export-oriented industrialization with the accumulation of dollar reserves. Policy makers like that in China accepted that diversifying current reserve risks could trigger market reactions that would devalue or hurt massive investments. Helleiner then turns to the events leading to the crisis, specifically the IPE scholars and the regulators who could have prevented the crisis entirely. The crisis itself was shocking as standards like the 1988 Basel Accord was set up by regulators to strengthen the financial market and improve practice standards or the Financial Stability Forum that was tasked with preventing the accumulation of risk system wide. Unfortunately regulators