From Asian To Global Financial Crisis
By Phar Kim Beng
Founder/Chair
Strategic Pan Indo-Pacific Arena
Strategicpipa.com
Twitter: @indo_pan
Facebook: https://www.facebook.com/Strategicpipa
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In spite of the complex rules and regulations that govern global banking, such as Basel I, II, and III, the banking sector surprisingly is extremely fluid. One can even claim that it is opaque, what with the existence of offshore financial centers that are often operating under the radar of the international financial authorities.
The revelation of the Panama Papers, not to mention the seedy relationship and 1MDB in Malaysia, has exposed a world of seedy finance and potentially the seed of what the late Susan Strange, a political economist at Warwick University, called “casino capitalism”, where nothing is manufactured or produced but reams and reams of collateralized debts and papers. Even now, just as the Pandemic has crossed 20 million cases, the stock bourses around the world are still on a bull-run. This is absurd. The rich continue to gain from the largess pumped into the system by the state, while the poor are confined to rolling on unemployment benefits, even if they are lucky enough to find their names on the government register.
Going back more than two decades ago, closer to Asia, another good case in point was Indonesia in 1997. When the Asian financial crisis landed with a vengeance in Thailand, the central bank in Indonesia was not aware of the numerous loans and borrowings that had been taken by the unknown Indonesian banks from the international financial institutions. When such news broke that the debt amounted to tens of billions of USD, the rupiah plunged almost instantly, and soon enough President Suharto was forced to step down too.
Thus, the role of the regulator, in Andrew Sheng’s view, is to understand both the systemic forces at work, and the loopholes that can potentially upend the financial system completely, as when shadow or informal banking has exceeded that regulatory supervision of the central bank, or, the financial authorities at hand. Even more attention should be given to the financial collusion between the establishment and the financial elites.
Without subjecting the banking sector, and the individuals associated with it, to serious scrutiny, then one financial crisis can easily lead to the other, before engulfing the rest of the world, as was the case with the global credit crisis in 2008. Andrew Sheng did not just write a book. But a careful collection of the statistics and numbers that proved where the dangers lurk.
And, the single biggest risk is indeed shadow banking or financial capitalism, where banks become grotesquely big, and impossible to hold accountable to, yet unbeknown to these banks, there are other entities that exist beneath its formal system and ecology, to enlarge the problem many times over. Be it a ravaging SARS Cov II virus, or, litany of bad debts, especially by small and medium enterprises, the global capitalism system is long over due for a serious institutional correction.
