Stitch,
<<This is, in fact, an apt statement for most of the troubled Asian economies isn't it?>>
Yes, but there are large differences in degree. In Hong Kong, where the leveraging was less extreme, the banks better controlled, and the political system is relatively stable, the negative effects will be (my guess) less severe and the recovery faster. In countries like Japan and South Korea, where the banks were stretched much farther, and Malaysia and Indonesia, where economic stress is pushing pre-existing political tensions to the breaking point, the damage will be much worse.
<<Inevitably aren't we heading for a tremendous amount of defaulted debt? Then the whole world pays.>>
Yes, the world will pay, and it will hurt, especially since there is no way of ensuring that those who profited from the bubble will pay for its bursting (bad in theory, good in practice, as in a small way I'm one of them). Hopefully after that experience people will concede that a truly free market is as unworkable as a command economy, and set to work developing ground rules that will harness the power of the market while restraining abuse. Big job, that...
Steve |
