Institutions Of The New Financial Architecture:Hedge Funds

Slobodan Lakic

Montenegrin Journal of Economics, 2009, vol. 5, issue 10, 95-109

Abstract: Crucial institutions of the new "financial superstructure" have lately determined functioning and evaluation of financial flows in an unscrupulous manner. The established domination of the New Wall Street system was not just a dominant strategic idea aimed at facing problems of the American economy, but was rather directed towards simultaneous gaining of enormous profits of selected institutions and "sophisticated" individuals, i.e. maintaining the hegemony of American "capitalism". "New participants, new practices and new dynamics" inaugurated debt, imposed leverage and leisurely redirected responsibility. The dominant theoretical hypothesis of the efficient market has not withstood the trial of time. Unprecedented expansion of the balance sheet is the result of participation of investment managers in the activities of the speculative bubble. Speculative activities of hedge funds - the so-call big players - have had negative consequences to the market liquidity again. Intentional inadequate regulation of hedge funds, followed by extremely aggressive strategies, seems to represent an institutional model in the existing risky environment. Otherwise, the purpose of existence of highly leveraged institutions will be lost by abolishing the constructed model.

Date: 2009
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