'Dollar Crisis' author: 2010 will bring more stimulus

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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.

Duncan learned first hand from working in Thailand for most of the 1990s in the run-up to the Asian financial crisis that rapid credit growth causes excess capacity and leads to busts. Then governments have to finance rescue plans -- very similar to what is now taking place around the world.

After predicting in his 2003 book "The Dollar Crisis" that the US property bubble would trigger a global recession, Duncan's new book argues that governments will have to keep stimulating their economies because US demand for cheap goods will not return to the halcyon days of the 2003 to 2007 boom.

Talk of an exit from the easy money policies in 2010 is entirely premature since investors will most likely see more US stimulus spending next year to prop up demand.

"This current round of stimulus will begin to wear out and everything will start to weaken again, and that will require another round of stimulus, not just from the US but from China as well," Duncan told Reuters.

"If this stimulus is delayed or withdrawn, we will get significant drops in asset prices and go back into recession."

Duncan is part of a group of economists like Marc Faber, Nouriel Roubini and James Grant, who believe the financial crisis is a symptom of something structurally wrong with the United States economy that will not be solved by the end of recession.

The institution of capitalism has been so corrupted by binges of borrowing financed with money printed on demand that governments now indefinitely have to take the reins of economies, Duncan argues in his book.

"We can't describe this economic system as capitalism, I describe it as statism," he said.