Two FT pieces by Tracy Alloway caught my eye this week: this article from Tuesday's print edition, and this post on Alphaville today. The phrase "collateral upgrades" from the former caught my eye: this is the latest of several—quite diverse—variations on a theme that have played out in recent years.
The first variation comes from the global supply of savings. On this topic I think of Martin Wolf's Fixing Global Finance. For the issue at hand, Anton Brender and Florence Pisani's Globalised Finance and its Collapse (especially chapter 4) is even more relevant. Both note that the economic policies of developing countries, especially China, led them to generate a large supply of savings. Holders of these savings sought to minimize credit and liquidity risk, and as emphasized by Brender and Pisani, financial innovation allowed them to do so. Read more