Endogenous, Exogenous And Existential Risk - New Global Solutions.

AuthorWalker, Prof G.

I. Endogenous, Exogenous And Existential Risk

Financial markets are complex adaptive systems with society being made up of multiple layers of interconnected and overlapping systems. (1) Modern technology has supplemented this with the creation of digital systems within this larger aggregation with special features and operations. (2) All systems are subject to internal, or endogenous, and external, or exogenous, threats and exposures. (3) Specific issues arise regarding Financial Technology (FinTech) and associated Regulatory Technology (RegTech) as well as other forms of new technology (NewTech or FutureTech). (4) Recent technological innovation, such as with the potential emergence of new, large circulation global digital coins (supercoins) or internet-based software applications (superapps), have further challenged the boundaries of traditional legacy regulation. (5) While many regulatory systems were strengthened following the global financial crisis, societies are still susceptible to larger exogenous threats, including continuing viral pandemics, natural disasters (earthquakes and tsunami), climatic impacts (floods and droughts), infrastructure (including cyber threats), technological risk, and warfare. (6) The Coronavirus 2020-2021 crisis stretched national and international control regimes to the limit. (7) New total global short and long-term solutions must be constructed with a new architecture erected to protect the resilience of all markets and systems, economies and societies more generally from internal, and endogenous, as well as external, and exogenous, shocks or threats on a continuing basis.

The opportunity can also be taken to develop several recommendations for the construction of a larger new 'sustainable, managed, adaptive, recurrent and targeted' (smart) framework using 'socially, managed, adaptive, regulatory and technology' (smart) tools. This would build a series of integrated 'Social, Market, Atmospheric (Climatic), Regulatory, Technology and Security' (SMART or SMARTS) and Society, Trade, Atmospheric, Regulatory, Technology and Safety (START or STARTS) agenda. This would be given effect to through a 'Global Investment, Finance and Trade' (GIFT) Treaty which would operate as a type of post-global financial crisis and post-Coronavirus crisis 'Bretton Woods III' Treaty reference system. This could be supported by a 'Global Reciprocal Economic Area Treaty' (GREAT) which could form the basis for a new 'Global SMART Market' system. This could include a more specific 'Climate, Health, Energy, Security and Technology' (CHEST) package of measures.

Countries can be assisted through a separate 'Financial Investment, Regulatory, Social and Technology' (FIRST) agenda with emerging markets benefiting from a dedicated 'Sustainable Assistance Finance and Engagement' (SAFE) program with climate protection secured through a parallel 'Sustainable Assistance and Value Enterprise' (SAVE) agenda. This can be supported by a 'Global Integrated Law and Technology' (GILT) or separate 'Market, Economics, Technology and Legal' (METAL) framework. All of this would operate through a series of new national and international 'Protocols' based on common objectives and principles under a 'Protocol Adaptive (or Adapted) Safety and Security' (PASS) regime within a new field of Public International Law. The objective would be to create an integrated form of protocol based 'Contingent Response for International Safety and Integrated Stability' (CRISIS) or 'Contingent Response for International Safety, Efficiency and Stability' (CRISES) program.

This Bretton Woods III system could form the basis for a 'Fifth Industrial Revolution' (FIR) or new 'Sustainable Technological and Industrial Revolution' (STIR) and 'Fifth Adaptive, Sustainable and Technological Economic Revolution' (FASTER). The purpose would be to create a set of essential global minimum measures or key 'Global Objectives and Absolute Living Standards' (GOALS) based on a 'Core Objectives, Directions, Ethics' (CODE) statement or primary set of 'Conduct Objectives Regulations and Ethics' (CORE). This may also be referred to as creating core 'Conduct Objectives, Principles and Ethics' (COPE). This would ensure 'Fundamental Interests, Rights and Entitlements' (FIRE), 'Fundamental Objectives, Rights, Claims, and Entitlements' (FORCE), 'Fundamental Objectives, Rights and Global Entitlements' (FORGE) and 'Global Rights, Interests and Principles' (GRIP). This can also be considered in terms of 'General Laws and Obligations for Behavior And (advanced) Living Standards' (GLOBALS). This would specifically protect the 'Controlled Linkage and Integrated Management of Atmospheric Targets and the Environment' (CLIMATE) and avoid 'Wasteful Injury, Loss and Damage' (WILD). This would be based on 'Carbon Low, Efficient and Atmospherically Neutral' (CLEAN) systems and apply 'Biologically sensitive Universal Integrated Law and Development' (BUILD) techniques to secure 'Development Reform and Efficient Atmospheric Management' (DREAM).

The Protocol series would be based on core 'Enhanced Targeted Higher Integrated Conduct Standards' (ETHICS) as well as 'Managed Ordinary (or Official) Responsibility, Application and Liability Standards' (MORALS) and 'Special Official Collective (or Community) Individual Advanced Living Standards' (SOCIALS). This could be considered to secure proper 'Conduct of Official New Technology enhanced Regulation, Oversight and Law' (CONTROL). This may include specific 'Technology and Ethical Conduct Heightened Standards' (TECHS) or 'Ethical Conduct Heightened Ordinary (or Official) Standards' (ECHOS). All of this would in so far as possible be based on the 'Rule of Law and Ethics or Enforcement' (ROLE) or 'Recognized Universal Laws and Ethics' (RULES). This would support 'Rights, Ethics and Standards Protection, Enforcement and Control Tools, Techniques or Targets' (RESPECT).

The system would promote 'New Earth Worth' (NEW) and recognize 'Fundamental Rights, Ethics and Entitlements' ('FREE'). It would be based on 'Fairness, Understanding, Equality and Legality' (FUEL) and ensure 'Responsible, Inclusive, Sustainable and Equal' (RISE) treatment. It would secure 'Happiness, Opportunity, Peace and Equality' (HOPE) and promote a more essential 'Humane Understanding of Mankind and Nature' (HUMAN). The overall objective would be to create a comprehensive and integrated global crisis management framework for new technological and exogenous shocks as well resolve the principal continuing global challenges and issues that apply at this time. This would incorporate a full set of essential and fundamental rights and protections in a clear, coherent, and accessible manner for the benefit of everyone, including individuals, societies, and nation states. This would be endogenous, exogenous, and essential at the same time as being consistent, complete and coherent to build a new world and new future.

II. New Global Challenges And New Global Solutions

We have created a new world. This is specifically based on technology and social media. The people of the world are now more intimately connected than ever before. (8) This brings massive benefits in terms of ease of social contact, communication, and exchange; although, it also creates inordinate new levels of mutual reliance and essential interdependence. (9) Common causes can quickly result in common damage and common loss. Financial markets are core components within any modern economy and society with market risk and exposures and other internal (endogenous) and external (exogenous) threats having to be built into any larger new systems examination and architecture. (10) This also requires the adoption of a longer, and inter-generational (11) or monumental approach, (12) rather than short-term planning perspective to respond to emergent threats and continuing larger global problems.

Financial markets and financial regulation have been developed to manage specific forms of identifiable risk as well as more peripheral exposures that may impact on market function and market stability. (13) Financial institutions attempt to identify a full range of possible exposures, and to deal with these either directly through risk management systems and controls, including with capital, liquidity, and leverage constraints; or indirectly through the maintenance of appropriate continuity and support management systems. (14) These include new Recovery and Resolution Programs (RRPs) and Special Resolution Regimes (SRRs). (15) Financial regulation has traditionally been either micro, market and sector specific, or macro focused, which assesses the financial system as a whole. (16) Other more subtle forms of exposure can be identified between these with new additional forms of prudential, or sub-prudential, regulation being developed. (17) A number of recommendations can be made to construct new, more effective and efficient types of market regulation and control. These are considered in this paper in terms of more market based, inter-agency and cross-policy based solutions which can be summarized in terms of meso-prudential (or co-prudential), para-prudential, peri-prudential, poly-prudential, or poly-modal regulation. (18)

The most significant challenges can arise in terms of wider external threats outside the financial market system itself. (19) These may be referred to as exo-systemic, or ultra-systemic, rather than endo-systemic threats which require a separate exo-prudential approach. (20) These originate outside the economy and financial system and may have no common connections or relationships, although, disturbance in this exo-systemic sphere may have a fundamental impact on financial markets and society as a whole. (21) These may move beyond creating instability within systems or markets to be existential, fatal, or terminal, and threaten the existence of the market, system, or society itself in a non-recoverable...

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