Abstract

[A historical analysis of the light and dark sides of financial innovation] The mechanisms for circulating money, which began as fundraising methods during the Crusades and the Age of Discovery, evolved and grew in scale as trade routes were developed. This evolved from private financing by monarchs to state financing (finance) and became a means of governing the state, giving rise to the South Sea Company bubble and the maverick John Law. The Industrial Revolution led to the massive expansion of finance, and modern corporations were established to meet this demand. The separation of capital and management occurred. Furthermore, stock exchanges, which originated from coffee houses, gradually became organized, expanding their secondary markets and growing into hubs of corporate finance. New York then grew into a financial hub, replacing London, whose momentum waned after the Industrial Revolution. Financial engineering, which was born to avoid various risks, began to run wild, from identifying risks to creating them, leading to Black Monday, the subprime mortgage crisis, and the Lehman Shock. This book provides an interesting explanation, using various anecdotes, of how finance, which grew and evolved as the unsung hero of economic development, ended up pushing developed countries to the brink of ruin.

Author’s Information

Born in Yokohama in 1949. Graduated from the Faculty of Commerce at Keio University. After working at Nippon Life Insurance Company and the Japanese Bankers Association, he completed his doctoral studies at the Graduate School of Economics at Keio University. He holds a PhD in Economics from Hosei University. He has served as a research assistant, associate professor, and professor at Hosei University's Faculty of Economics, a professor at Waseda University's Faculty of Commerce, deputy director-general for the Cabinet Secretariat (Economic and Fiscal Policy), a professor at Waseda University's Graduate School of Finance, dean of the Graduate School of Finance, and a professor at the Graduate School of Business and Finance. During this time, he has served as a visiting scholar at the Massachusetts Institute of Technology's Sloan School (Japan-US Friendship Commission), a visiting scholar at the University of Michigan Business School, a committee member and curriculum chair for the Securities Analyst Examination, a special research fellow at the Policy Research Institute (formerly the Ministry of Finance's Institute of Fiscal and Monetary Policy), a certified public accountant examination committee member, president of the Japan Finance Association, president of the Japan Real Options Association, and a visiting scholar at the Stern School of New York University Graduate School. He has also served as an editorial board member for the Economic Research Institute's "Economic Analysis" journal.