Don't avoid the issue: Prevent Bubbles

High authorities like the G-7, IMF, US Treasury, etc., have been talking about the current credit and housing crises in US and ways to solve these problems. But it seems they are all trying to avoid the fundamental issue, namely, how to prevent the creation of asset bubbles and speculations. It won't please Wall Street nor Main Street, I think. It won't please our Asian counterparts too.

But what we need now is, indeed, prevention of bubbles. If there is a good lesson in the current crises, it is that after a bubble burst, you cannot provide real rescue no matter what monetary policies, administrative measures or artificial actions that the government may take or adopt. The asset bubble of Japan in the 1990s, the Asian financial crises in 1997-98, the dot.com bubble burst in 2001, and the current US housing crisis provide ample evidence to explain why prevention is better than cure, if you can find a cure!

Even Alan Greenspan has acknowledged that there is over 50% chance of US recession despite all the drastic and unconventional steps taken by the Fed and the US government. No, I don't think there is a cure after the bubble burst. It's like cancer, AIDS, SARS, once you have it, the chances of recovery is very limited, though not impossible. The only way to help is to prevent contracting the disease. Quarantine does not and cannot work because of globalization, the inter-connections between financial institutions and systems, the complexities of our international economic integration, etc. True that you can't isolate US slowdown from the rest of the world especially export-reliance countries in the emerging markets/Asia; you can't limit the credit crunch to North America nor can you stop USD sinking causing global inflation, skyrocketing fuel, food and grain prices.

We have gone through almost a decade in the 21st century. What we need is something NEW: a new mindset, a new mental and intellectual horizon, a new international perspective, a new thinking, a new and powerful ideology to tackle the new 21st century crises of our planet earth. If we want our future generations to have a better world, we must CHANGE, we must be BRAVE to make changes and we must be willing to SACRIFICE OUR SELF-INTEREST.

Lastly, we must not give up HOPE and LOVE for they are the forces that give warmth and meaning to life and our world.