Things are different today: the challenge of global systemic risks

Renn, Ortwin; Lucas, Klaus; Haas, Armin; Jaeger, Carlo

doi:10.1080/13669877.2017.1409252

Cited by 67 publications

(61 citation statements)

References 33 publications

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“…The switch from the expansionary to the contractionary state of the system can be thought of as the persistent prevalence of systemic risk, which in the case of the IMS even extends to global dimensions. Renn et al (2017) provide a starting point for the study of global systemic risks, which may potentially be merged with the conceptual ideas of the Money View.…”

Section: Conclusion: the Post-2008 International Monetary Systemmentioning

confidence: 99%

Offshore Dollar Creation and the Emergence of the Post-2008 International Monetary System

Murau

2018

SSRN Journal

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This paper studies the transformation of the International Monetary System (IMS) in the run up to and after the 2007-9 Financial Crisis. Adopting a Money View perspective, it argues that the IMS, in contrast to widespread skepticism, does have a system-like quality. This paper understands the IMS as a US-centered hierarchical payments system within which short-term debt instruments are issued as credit money by various public and private financial institutions, in particular central, commercial and shadow banks. With the Fed located at the apex of the IMS, credit money forms denominated in US dollars are located highest up in the hierarchy and trade at par with each other, whilst they typically have fluctuating exchange rates to credit money forms denominated in the units of account of other monetary jurisdictions. From this, the paper argues that the key component of today's IMS is the 'realm' of offshore US dollar creation, which is situated in between US dollar-denominated credit money issued in the US ('onshore dollars') and non-US dollar-denominated credit money issued outside the US. In this 'offshore dollar realm', non-US financial institutions are able to create international liquidity via US dollar-denominated private credit money outside the US. The paper systematically carves out the post-2008 setup of the offshore dollar realm with a focus on Eurodollar deposits, offshore money market fund shares, foreign exchange swaps and central bank swaps. With the institutional innovations materializing during the 2007-9 Financial Crisis, the IMS is now a publicprivate hybrid that fully mirrors the onshore US monetary system in the offshore dollar realm.

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Section: Conclusion: the Post-2008 International Monetary Systemmentioning

confidence: 99%

Offshore Dollar Creation and the Emergence of the Post-2008 International Monetary System

Murau

2018

SSRN Journal

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“…On the other hand, the partial breakdown of the world's finance system experienced in 2007 and the following years is a paradigmatic example of a systemic risk, although the system as a whole clearly did not break down. Renn et al (2017) have therefore suggested use of a more Wittgensteinian approach by specifying the properties that are associated with systemic risks without claiming to have a complete or mutually exhaustive list. The main thrust of systemic risks, however, is clear: systemic risk refers to the possibility of a catastrophic regime shift or even breakdown of a global system that involves many interacting elements that are poorly understood.…”

Section: Introductionmentioning

confidence: 99%

Systemic Risks: A Homomorphic Approach on the Basis of Complexity Science

Lucas

Renn

Jaeger

et al. 2018

Int J Disaster Risk Sci

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Although the notion of systemic risk gained prominence with respect to financial systems, it is a generic term that refers to risks of increasing importance in many domains-risks that cannot be tackled by conventional techniques of risk management and governance. We build on a domain-overarching definition of systemic risks by highlighting crucial properties that distinguish them from conventional risks and plain disasters. References to typical examples from various domains are included. Common features of systemic risks in different domains-such as the role of agents and emergence phenomena, tipping and cascading, parameters indicating instability, and historicity-turn out to be more than noncommittal empirical observations. Rather these features can be related to fundamental theory for relatively simple and well-understood systems in physics and chemistry. A crucial mechanism is the breakdown of macroscopic patterns of whole systems due to feedback reinforcing actions of agents on the microlevel, where the reinforcement is triggered by boundary conditions moving beyond critical tipping points. Throughout the whole article, emphasis is placed on the role of complexity science as a basis for unifying the phenomena of systemic risks in widely different domains.

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“…In order to take account of this situation, the Organisation for Economic Co-operation and Development (OECD) introduced the new category of "systemic risk". If we take a simple device such as a car or a sewing machine, a total collapse of such a technological device would not qualify as a systemic risk (Renn et al [5] ). "Systemic risk refers to the risk or probability of breakdowns in an entire system, as opposed to breakdowns in individual parts or components, and is evidenced by co-movements (correlation) among most or all parts".…”

Section: Introductionmentioning

confidence: 99%

“…Renn et al [5] emphasize four major properties of systemic risks. They are: 1) transboundary, 2) highly interconnected and intertwined leading to complex causal structures, 3) nonlinear in the cause-effect relationships showing often unknown tipping points or tipping areas, and 4) stochastic in their effect structure.…”

Section: Introductionmentioning

confidence: 99%

“…[4] This definition assumes that the targeted system represents a vital service to society such as energy or financial stability. If we take a simple device such as a car or a sewing machine, a total collapse of such a technological device would not qualify as a systemic risk (Renn et al [5] ). Hence, systemic risk refers to a potential collapse of a system of potentially global importance and criticality to services that humans urgently need.…”

Section: Introductionmentioning

confidence: 99%

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Systemic Risks: Theory and Mathematical Modeling

Lucas

Renn

Jaeger

2018

Advcd Theory and Sims

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In a globally connected world, new opportunities are associated with new types of risks. These new types of risks do not respect national boundaries nor are they restricted to particular locations or systems. Instead, they are characterized by contagion and proliferation processes, frequently on the basis of a network structure, with the result that a seemingly harmless local event is able to cause a complete system collapse. The proposal has been made to refer to these types of new risks as systemic risks. It turns out that key phenomena associated with systemic risks can quite naturally be categorized and analyzed in terms of notions originally established in the natural sciences, such as those of chaos, order, and self-organization, or, more concisely, of dynamic structure generation in complex open systems. In this Essay, the claim is made that there is a homomorphism within the dynamic structure generation across very different domains of systemic risks. Furthermore, there are structural similarities between complex structures in general, and systemic risks in particular. Based on this assumption, one can use established methodologies of complexity science to reveal general macroscopic patterns that seem to govern the dynamics of complex systems.

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Things are different today: the challenge of global systemic risks

Cited by 67 publications

References 33 publications

Offshore Dollar Creation and the Emergence of the Post-2008 International Monetary System

Offshore Dollar Creation and the Emergence of the Post-2008 International Monetary System

Systemic Risks: A Homomorphic Approach on the Basis of Complexity Science

Systemic Risks: Theory and Mathematical Modeling

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