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Monday, November 15, 2010

Dr M: Banking, finance need to be regulated


Uncontrolled markets will result in sustained recession

KUALA LUMPUR: The world has to brace itself for a sustained recession if banking and financial markets were left to regulate themselves in the free market.

Former prime minister Tun Dr Mahathir Mohamad said governments must continue to oversee the regulation of banks and financial institutions.

“Unless the Government oversees and limits the ability for the market to abuse (the banking systems) then, of course, we are going to have this kind of (global economic) crisis.

“This crisis has taken place because the market is left to regulate itself. But instead of regulating itself, it just finds new ways around the regulations and that’s what caused the present crisis,” he said.

Dr Mahathir likened the free market to a religion which could not be questioned.

“This idea of a free market has become almost like a religion. You cannot question it, even when it fails,” he said.

Dr Mahathir said the present world financial crisis was a result of “rampant” abuse of the financial and banking system on a massive scale.

“And the abuses became rampant because of the idea that governments must not interfere with the financial market. (That) the market it seems would regulate itself,” he explained.

He urged for the gold dinar to be institutionalised as the standard against which all currencies were measured for the sake of stability.

“It’s something tangible and something that has value anywhere in the world,” he said.

However, he said the gold dinar system, if implemented, should only be used for settlements of international trade.

Dr Mahathir also criticised the continued use of the US dollar as a base currency for exchange and trade.

“The US dollar has got no value whatsoever. It’s got no backing, no reserve. But we accept it as if it has some value and because we accept it, it has value,” he said.

He said currency trading was reported to be worth as much as US$4 trillion a day now, larger than during the 1997 Asian currency crisis. In contrast, he said US$4 trillion was equal to the total production of goods and services in Germany in a year.

“The US$4 trillion expended in Germany created much wealth for the country and the people. But what does the US$1 trillion of trade in currency do?

“Apart from a few fund managers and rich investors becoming very rich, the contribution to job creation, business growth and general economic development was almost nil,” he said.




By LESTER KONG
lester@thestar.com.my

1 comment:

Penny Stock Tips Advice said...

Why not start a non profit banking company to make small business loans. Because its illegal ever heard of such a thing. Why because goldman' bank of america and all the other mega financial institutions want nothing of the sort. Wallmart wanted to have a bank of their own for other reasons of course but they can not get a charter from the federal goverment to run their own bank. The financial interests are much to powerful to let that happen.