Monday, January 05, 2009

Partial retreat from globalisation

RBS's shift towards its home market is a microcosm of what most banks are doing all over the world.

And as banks do their patriotic duty and direct their increasingly precious and scare capital resources towards their domestic markets, the amount of credit available in the world as a whole is being compressed.

What's going on can be seen as a partial retreat from globalisation in the financial economy.

The scale and longevity of that retreat in this new year will determine all our economic fortunes, wherever we may be in the world.


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1 comment:

  1. ymJanuary 05, 2009 5:34 PM

    Mr Tan,
    i find it disappointing that nearly every mainstream media and central banker is urging banks to lend more, leverage more, businesses and consumers pls take on more debt..

    isn't "more debt" what got us into trouble at the 1st place? so how can the disease also be the cure?

    there are a few simple explanations to why banks are not lending :
    - 1stly, consumers could have learnt their lesson and reduce debt burden (which is good)
    - 2ndly, banks are capital impaired to lend (all the capital raised is to plug a gapping hole)
    - 3rdly, there arent many credit worth ppl to lend to
    - 4thly, there is simply NOTHING left to lend..

    the 4th reason is an abstract austrian school reasoning but i suspect is an accurate description of the ultimate result of fractional-reserve lending and years of easy monetary policies by central banks..

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