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Liberalisation or regulation for international banks? That’s the question

Published 16th July 2010 - 0 comments - 1689 views -

Monetary flows are just vehicle by which resources travel from the rich world to the poor one, experts say.
Thus, by impeding rich countries to invest in Least Develop Countries (LDC) we achieve nothing... no development neither profit maximising for investors.
By the other hand, proregulators say that investments should be regulated by governments.
Their agrument is simple: irresponsible cash flows have the power to bring a whole economy down in a matther of days.
HOW? By forcing the receiver to adjust his exchange rates and the value of their local currency. This is why, after the second World War II there were many restrictions to intenational financial flows... some say, to ensure stability.
Nonetheless, others think that financial investment after World War II stopped because the reconstruction process in European countries was already in the way and there was no need for rich countries to buy the enourmous amount of products that were being produced in LDC, since they needed to catch up by re-building their own productive chain. Today, this has been proved wrong, especially with manufactured products comming to Europe from all over the world.
This recess in the international financial flow affected LDC that couldn't keep growing and developing as they did during World War II. But that's history... and today no one will justify a war in order to increase production and exports, at least not openly...
So the argument of regulation really comes from the necessity to impede large flows of capital pooring into poor countries with merely one objetive: to provide lenders with a massive market where they can lend at a high interest and take away their money right after, forcing people to pay while the real economy sinks and the local currency falls.
 
Regulation is needed, but many are pushing so that international banks get an open bar under the umbrella of globalization and market liberalisation. This may not be the way to achieve development, especially not in poor countries. This would be the point of view of a pro regulation person. Irresponsible investment is their best argument and the current economic crisis, their case us study.
Nonetheless, some will argue that regulation should come straight from the markets and the competitors and will reject any kind of public intervention. Corruption and political inestability are the best arguments for pro liberalisation supporters to reject the goverments intervention.


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