Price Disequilibrium Theory

Abstract

Even in the modern ‘knowledge economy’ in a global world, financial systems still continue to be central to global commerce. Technological advances in computer and communications have changed both knowledge and the economy and also the financial system. Globalization and technology have made international finance more powerful and important to the world; but they have increased volatility, instability, and fraud in international finance. For example, Martin Wolf wrote: “It is possible to identify … two huge shifts (in the economy). One is ‘liberalization’, the reliance on market forces across much of the world economy, including and notably, in finance. A second is ‘technological change’, in particular the information and communications technology revolution, which turbocharged the integration of economies, again, quite particularly, financial markets …. These great shifts of our time have permitted or created significant further changes. Among the most important have been: the emergence of a globalized world economy; soaring inequality in most economies; the entry of gigantic emerging economies (e.g., China and India) …, In brief, we have a world that is in the midst of historic shifts towards a more market-oriented, financially driven and globalized world economy …. It is a world that has seen downward shocks to the rate of inflation. It is also, it turns out, a world that is hugely crisis prone.” (Wolf 2014)