Global Financial Crisis
Warnings of a new global financial crisis
By Martin Khor
There are increasing warnings of an imminent new financial crisis, not only from the billionaire investor George Soros, but also from eminent economists associated with the Bank for International Settlements, the bank of central banks. The warnings come at a moment when there are signs of international capital flowing out of some emerging economies, including Turkey, Argentina and Indonesia. Some economists have been warning that the boom-bust cycle in capital flows to developing countries will cause disruption, when there is a turn from boom to bust. All it needs is a trigger, which may then snowball as investors in herd-like manner head for the exit door. Their behaviour is akin to a self-fulfilling prophecy: if enough speculative investors think this is the time to move back to the global financial capitals, then the exodus will happen, as it did in previous “bust” phases of the cycle. (more…)
Prepare Now for the Next Financial Crisis
By Martin Khor
The Asian financial crisis started 20 years ago and the global financial crisis and recession 9 years back. When a new global financial crisis strikes, the developing countries will be more damaged than in the last crisis as they have become less resilient and more vulnerable. They thus need to prepare from being overwhelmed. (more…)
The Asian financial crisis – 20 years later
By Martin Khor
It’s been 20 years since the Asian financial crisis struck in July 1997. Since then there has been an even bigger global financial crisis, centred in the United States starting in 2008. Will there be another crisis in the near future? The Asian crisis began when speculators brought down the Thai baht, making fortunes in the process. Within months, the currencies of Indonesia, South Korea and Malaysia were also affected. The crisis was to turn the East Asian Miracle into an Asian Financial Nightmare. (more…)
Can the World Afford to Put All Hopes on Debt Contract Improvements for Sovereign Debt Workout?
By Yuefen Li
The lack of a formal sovereign debt restructuring mechanism has been considered by many as a serious deficit or missing link in the international financial architecture. However, even though the international debates on the topic have been going on for decades, heating up each time with the onset of a debt crisis and cooling down when the crisis was contained, up to now such debates have not yet come to fruition. With the onset of the global financial crisis and especially the legal litigation against Argentina and Greek debt crisis, the debate has become even more intensified with views more convergent than ever on the need of a mechanism. For decades, timely and orderly sovereign debt restructuring which can restore medium term debt sustainability to debtor countries as well as less costly to creditors has been the common expectation of stakeholders involved in sovereign debt restructuring, except those who want to get their windfalls in the debt crisis. (more…)
Developing Economies Increasingly Vulnerable in Unstable Global Financial System
By Yılmaz Akyüz
After a series of crises with severe economic and social consequences in the 1990s and early 2000s, emerging and developing economies have become even more closely integrated into what is widely recognised as an inherently unstable international financial system. Both policies in these countries and a highly accommodating global financial environment have played a role. Not only have their traditional cross-border linkages been deepened and external balance sheets expanded rapidly, but also foreign presence in their domestic credit, bond, equity and property markets has reached unprecedented levels. New channels have thus emerged for the transmission of financial shocks from global boom-bust cycles. (more…)
No respite, 5 years after Lehman
By Martin Khor
Five years after the Lehman Brothers collapse triggered the global financial crisis, there are still no effective financial regulations in developed countries, while the developing countries face big new challenges.
Growth in the South: Resilience, Decoupling, Recoupling
Rapid acceleration of growth in developing countries (DCs) and the widening of their growth gap with advanced economies (AEs) before the outbreak of the global financial crisis were widely interpreted as decoupling of the South from the North. In the early days of the crisis, there were also widespread expectations that growth in the South would be little affected by the difficulties facing AEs. In fact, DCs slowed considerably in 2009 as a result of contraction of exports to AEs and financial contagion. However, they recovered rapidly, with growth rates in 2010-11 matching or exceeding the levels seen before the crisis, while recovery in the US has remained weak and erratic, and Europe has gone into a second dip. This has again revived the decoupling thesis, notwithstanding the sharp slowdown in many major DCs over the course of the current year.
Re-making Financial Policy to Meet Society’s Needs
The financial sector has been hit by major crises and scandals, to the point that its credibility with the public has fallen to historically low levels. A re- thinking and re-making of financial policies and the role of financial institutions is thus urgently needed. This was the theme of a lecture presented by the distinguished former Governor of the Reserve Bank of India, Yaga Venugopal Reddy, which was made in conjuncture with the 2012 Annual General Meeting of the Bank for International Settlements held in Basel, Switzerland. The 2012 Per Jacobsson Foundation Lecture by Mr Reddy, made on 24 June 2012, covered three main themes: (1) Society and Finance, (2) Economic Policies and the Financial Sector, and (3) Regulation of the Financial Sector.
Below is the first part of the lecture, on Society and Finance. Future issues of SouthViews will publish the other two parts of the lecture.
Sustainable Development as an Answer to Economic and Financial Crises
Below is the speech delivered by Dr Yilmaz Akyüz, Chief Economist of the South Centre on the Sustainable Development Dialogue Roundtable on the Global Financial Crisis, UN Conference on Sustainable Development 2012, in Rio de Janeiro on 16 June 2012. (more…)