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Professor traces root cause of financial tsunami

By Zhu Yuan (China Daily)
Updated: 2009-07-15 07:48

Something that everybody talks about is likely to become a general term, with its context and connection to other things becoming hazy. The "financial crisis", which triggered the current global economic slowdown, may have developed into such an expression. For those who have been vague about what it is all about from the very beginning, such an epochal turmoil may just be one more term for a bad thing in economic sphere.

Han Xiuyun, a professor of economics with Tsinghua University, tells us all about the financial turmoil in her book: Does Financial Tsunami Have Anything to Do with Me?

Her book does not just elaborate on the connection between sub-prime loans, mortgage-backed securities, collateralized debt obligation and credit default swaps. Instead, she has established connecting links between such global events as the Asian financial crisis in 1997, the birth of the euro in 1999, the NATO bombing of the Federal Republic of Yugoslavia in 1999, the September 11 terrorist attack against the United States and the Iraq War. They are all closely related to the financial crisis, according to the author.

Her analysis of the connections points to the fact that the US as the largest economic powerhouse has tried whatever it can to bring the entire world under its control not only militarily but also economically.

The Asian financial crisis in 1997 was the direct result of some major Asian economies' opening up their financial markets, which then fell victim to speculation of international hot money from the rest of the world, particularly the US. East Asian countries were ripped off by the US in that crisis.

The unified currency, euro, was an option for European countries to defend themselves against the invasion by the US dollar. But the Kosovo crisis provided the US with an opportunity to cripple the rise of this currency, which depreciated greatly after the bombing of the former Yugoslavia. Then came the Internet and Nasdaq that gave another boost to the prosperity of the US economy. The burst of the bubbles and the September 11 terrorist attack had dealt a heavy blow to the US economy, and the Iraq War that followed had greatly drained the US of resources.

Then the real estate market became the only area, which could help the world's sole superpower sustain its economic prosperity. That made it quite easy to understand neo-liberal economics, which holds that markets are best left to regulate themselves and require no oversight and transparency.

The result is the entire world has paid for the bubble of the US real estate market. This book believes that the US intentionally created the bubble in order to let the rest of the world to pay for what it had spent in launching and sustaining the Iraq War.

True, the financial tsunami has seriously affected the Chinese economy in many ways. But it can be considered as positive for China, according to the author. It has provided the country with an opportunity for its further development as prices for raw materials have dropped because of the meltdown. This will reduce the risk of the inflation.

In addition, the timely burst of the bubble has awakened the country from following further in the footsteps of the US. We do have some economists, who blindly worship everything in the US. They believe that China can never become prosperous unless we follow whatever the Americans do.

This financial crisis can be a mirror for us to reflect on the American lifestyle of overspending the wealth meant for the future and also on what we are doing right now.

The book is selling well. This is a sign that more Chinese are concerned not only with their immediate interests but also issues that impact the economy, society and the country, and which also affects their lives.