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Operating an open capital account, Indonesia was always vulnerable to panic.
But this makes the financial system vulnerable to panic if holders lose confidence in their private money and try to exchange it for the real thing.Their theory is well supported by history, as Gary Gorton shows in his new book, Misunderstanding Financial Crises (reviewed here in this week's issue of The Economist).
Visa says last-minute shoppers are vulnerable to "panic shopping," in which they overspend because they are shopping in a hurry to get things in time for Christmas.
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The highly leveraged firms were vulnerable to panics.
That made them more vulnerable to panics which, like bank runs, are self-fulfilling.It is a compelling argument.
They aren't so vulnerable to panics and crises because bankers and traders are reckless, cocaine-brained cowboys destroying whatever stands in the way of a great bonus.
In a speech to the Partnership for New York City, he conceded that the Fed and other regulators "did not sufficiently understand the importance" of the increased risks that had made the financial system "much more fragile and vulnerable" to panics.
Gary B. Gorton, a finance professor at Yale, said the financial system would remain vulnerable to panics because the legislation would not improve the reliability of the markets where lenders get money, by issuing short-term debt called commercial paper or loans called repurchase agreements or "repos".
With no way to independently verify, in real time, the precise nature of financial firms' assets and liabilities, they are all vulnerable to panics by investors, counterparties, and depositors, based on rumors and speculation as well as fact.
New York -- hardest hit by the Sept. 11 attacks -- still seemed deeply vulnerable, both to attack and to panic.
As the weight of men started to close in on me, I realized how vulnerable I was and started to panic.
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Justyna Jupowicz-Kozak
CEO of Professional Science Editing for Scientists @ prosciediting.com