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According to the Economic Forum on East Asia last Sunday, there will be an economic chaos that will arise in the international financing system that the international community faces a real risk of.
The delegates in the 2 day forums were told that the feeling of complacency in the uninterrupted global growth has already set in after several years and there are no proof’s suggesting there are self correcting mechanisms that can take place to prevent this major shock in the global financial systems.
The Singaporean Second Minister for Finance, Tharman Shanmugaratman already warned that the financial contagion will hit as least expected and this will bring a vicious consequence
According to Shanmugaratman "You cannot predict when it will come. You cannot predict the scales but there is a feeling, this will have a very huge impact and this will be very difficult to control," this was when a financial crisis in the regions economy 10 years ago.
The Minister of Finance in Thailand, Chalongphob Sussangkan stated “we cannot be shown a self-correcting tool” when searching at the global economic imbalance. “We are just moving basically with the situation, they don’t have a correcting tool, we hope that the market can perform a correction.”
"But all we know this s like stretching an elastic band. If you let the market correct these tools they will eventually snap and thus bringing a huge economic chaos worldwide”
These imbalances internationally is referred to as the twin US budget and current account deficits, accumulating the huge foreign currency reserves in the Asian central banks and the diverging rates in the growth of world’s major economy.
These problems stems in Asia, they take hold of the huge majority in the world’s foreign reserve at a 2.7 trillion US dollars, they must be doing something about it. As told by the finance minister of Thailand.
According to Chalongphob "East Asia seems to simply accumulate the deficit in the United States and when they accumulated more, to protect more, to make sure that the value in the US dollar will not decline otherwise there will be a conflict in all the central banks,"
He also said that "I think in East Asia does they have a major role shifting the way in the global financial system, the region who takes hold of the most world's official reserves,"
The Singaporean 2nd minister stated that the international community needs to brace themselves for "the unknown unknowns that come along every few years, and it could be a pretty vicious unknown unknown with an unwinding that's unpredictable in global financial markets."
Shanmugaratnam stated that the bubbles in the property and the equity market are proof that suggests there will be a financial shock.
Rate environment and a low volatility environment, but seasoned observers, those who have been around long enough, know that a shock is very likely to come at some point.
"You really cannot tell how the unwinding is going to play, but this can be substantial and I think the developing markets needs to brace up them, they have to put in place of the shock absorbers to deal with event."
20:31
Posted on Jun-24-2007
