'Dollar Crisis' author: 2010 will bring more stimulus
Published on Thu, Dec 17, 2009 at 08:44 | Source : Reuters
Updated at Thu, Dec 17, 2009 at 14:28
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'Dollar Crisis' author: 2010 will bring more stimulus
It was fitting that Richard Duncan sequestered himself in Bangkok to write his latest book "The Corruption of Capitalism," a post-mortem of the credit bubble that crippled the world's financial system.
Think again about China's prospects For many investors, emerging markets such as China are the wave of the future. However, Duncan, a partner at Blackhorse Asset Management, a hedge fund in Singapore, said investors were too optimistic about China, which he said is certainly headed for bubble trouble.
He is doubtful the fiscal stimulus and new loan growth amounting to about 40 percent of gross domestic product will lead to structural change in the export-dependent economy.
"That will just lead to more excess capacity with no one to sell it to, which means product prices will be extremely depressed, companies won't profitable and banks won't be repaid."
The real antidote to the cycle of credit-fueled bubble and bust, in Duncan's view, is for the US government to spend an additional USD3 trillion in the next 10 years to reindustrialise.
Stop making things that can be bought cheaply somewhere else and develop solar, biotechnology and nanotechnology products of the future. That will over the very long term shrink the US trade deficit and provide sustainable growth, Duncan said.
Among his more austere prescriptions, Duncan would fix exchange rates, apply credit controls and only allow money supply to grow in line with population growth. He would also dissolve the Federal Reserve.
Duncan believes these radical steps are the only way to put the US economy back on a path toward fiscal prudence and sound money, or what he calls economic orthodoxy. "They are radical," he said. "Radically orthodox."
