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If I ruled the world … nope, Goldman Sachs does

Paul Kedrosky's Infectious Greed is always a great read, and today he's posted some blurb from Science Magazine that's worth repeating here.

The Science article is called Economic Networks: The New Challenges
by Frank Schweitzer et al. in Science, July 24, 2009.  Here's the abstract:

"The current economic crisis illustrates a critical need for new and fundamental understanding of the structure and dynamics of economic networks. Economic systems are increasingly built on interdependencies, implemented through trans-national credit and investment networks, trade relations, or supply chains that have proven difficult to predict and control. We need, therefore, an approach that stresses the systemic complexity of economic networks and that can be used to revise and extend established paradigms in economic theory. This will facilitate the design of policies that reduce conflicts between individual interests and global efficiency, as well as reduce the risk of global failure by making economic networks more robust."

The bit that Paul picked out is a graphic that shows the flow and liquidity of trading between banks, as follows:


Node colors express different
geographical areas: European Union members (red), North America (blue),
other countries (green).  The identifiers in the nodes represent major financial institutions
and the links are both directed and weighted and represent the
strongest existing relations among them.

Even with the reduced number of links
displayed in the figure, relative to the true world economy, the
network shows a high connectivity among the financial institutions that
have mutual share-holdings and closed loops involving several nodes.


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About Chris M Skinner

Chris Skinner is best known as an independent commentator on the financial markets through his blog, TheFinanser.com, as author of the bestselling book Digital Bank, and Chair of the European networking forum the Financial Services Club. He has been voted one of the most influential people in banking by The Financial Brand (as well as one of the best blogs), a FinTech Titan (Next Bank), one of the Fintech Leaders you need to follow (City AM, Deluxe and Jax Finance), as well as one of the Top 40 most influential people in financial technology by the Wall Street Journal’s Financial News. To learn more click here...

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