The concept of ‘finance’ or the ‘financial system’ can be confusing. The assumption is that the financial system consists of related markets trading in a variety of financial instruments that are ultimately of a similar nature. In the late-19th century, however, financial assets have bifurcated into broadly two classes of property titles: incorporeal assets and intangible assets. This article argues that interrelations between the two classes of assets have generated pro-cyclical trends that are not dealt with by current regulation. It argues that these pro-cyclical trends can be even more confusing in the age of globalisation.
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