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Monday, October 27, 2008

Financial crisis: The collapse of globalisation?

In my not very expert opinion, this financial crisis looks very much like the collapse of globalisation. It is because there are no boundaries that a problem in one region affects the whole globe.

Thus faulty financial instruments have been built upon and tangled up in US sub-prime mortgages and other dodgy assets, both tangible and intangible. It is like the car ferry and tanker disasters that led to the hulls of such ships being partitioned, so that the flooding of one section would not spread throughout and cause a vessel to sink.

If this is the case there is no point throwing money into this problem. Only regulation will fix it, and then the bilge can be pumped out, section by section. It's impossible to "pump out the bilge" now, because the problems are still coming in from all sides.

Zoz

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