Title: Global Financial Crisis & Implications to Thailand: An Ex-Banker's View
Abstract: The current global financial crisis is not a typical crisis with simple economic contraction. The crisis is caused by the endogenous risk generating and amplified within the banking system and credit market. In the past boom and bust cycle caused by excessive speculation is localized and caused by exogenous risk. This may be easily contained. In the past, another strong balance sheet financial institutions, rich nation, IMF or World Banks that have separated financial system may rush into rescue. But nowadays securitization process has spread out the risks to every part of the world. In the deregulated global finance, all banks' balance sheets are interlocked and cascaded by common factors like the fear of inability to price and to sell ABS CDO and CDS. As every financial institution reacts to the high uncertainty, banks stop lending to each other. Credit freeze and liquidity crunch. De-leveraging process (D-process) become self-perpetuating process as all institutions are forced to run down investment and risk participation (e.g. equity, lower grade debt, real estate..) most dependence on credit and liquidity and from long term credit vehicles (e.g. bonds, CDO..). Quantitative monetary easing, coordinated rate cut around the world and liquidity injection from the government may stem the panic and only stabilize the financial market, not a quick end to the worldwide recession.
Publication Year: 2008
Publication Date: 2008-01-01
Language: en
Type: article
Indexed In: ['crossref']
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Cited By Count: 1
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