Financial business is creating credit without limit until a crisis occurs. That’s the fundamental flaw which caused the current crisis, says Andrew Sheng in this INET interview. He also worries that the destruction of the tropical forest and other threats to the biosphere have the same character of ungovernable excesses until a crisis occurs.
Sheng says that what he learned about free markets at university - and what he practiced until 2008 - he now views as an intellectual dead-end. He believes that the takeover of private debts and zero-interest rate policies by governments around the world are both attempts to postpone the business cycle. He calls large complex financial institutions that move financial capital around the globe ungovernable Godzillas. These are a few of the many firm judgements coming from the Chief Adviser to the China Banking Regulatory Commission.
The world economy would see the mother of all crises, Sheng warns, if governments fail at managing the leveraged capital that is flowing into emerging markets these days. He also talks about the Chinese-American policy dialogue, that China needs to accept that with greater economic strength comes greater responsibility; and the world needs to respect that China, because of its size, is sailing into unknown territory.
You can engage all these ideas by watching the interview on video, and give your comments below.