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Published by แดเนียล, 2019-01-02 23:31:52

The mechanics of consumer markets and the manipulative tools for social transformation

Internationalism, Globalisation and

External Enforcements

in Thailand

The mechanics of consumer markets
and the manipulative tools for social transformation

Clarifications, possible conclusions
and recommendations

Version 1.1 09032549


1 INTRODUCTION SUMMARY .................................................................................................. 4
IMPACTING AND TRANSFORMING THE KINGDOM ............................................................... 5
2.1 THE NEW SET OF VALUES ............................................................................................................ 5
2.2 THE MECHANISM OF MONEY ....................................................................................................... 6

3 UNDERSTANDING THE INTENTIONS .............................................................................. 6
3.1 STRATEGY AND TACTICS .............................................................................................................. 7
3.1.1 Switzerland; example of successful independence ............................................................................ 7
4 GOVERNANCE IN TIMES OF HARDSHIP ........................................................................... 8

5.1 STANDARDISED FORMULAS OF MANIPULATION ........................................................................... 9
5.2 THE OBJECTIVES OF SPENDING ................................................................................................. 10

6 THE CREATING OF DEPENDENCIES .............................................................................. 10
6.1 CONSUMER MARKETS AND THE SUPPLY OF MONEY ON CREDIT ................................................. 11
6.2 EUROPEAN FACTS...................................................................................................................... 11
6.3 ENFORCEMENT THROUGH INTERNATIONAL TRADE AGREEMENTS ............................................ 12
7.1 THE EUROPEAN REQUIREMENTS ............................................................................................... 14
7.2 VISION AND LEADERSHIP .......................................................................................................... 15
7.2.1 Sweden; example of targeted oil-free economy .............................................................................. 16
7.3 EDUCATION VERSUS INDOCTRINATION ..................................................................................... 16
8 THE TRUE NATURE OF CAPITAL DRIVEN DEMOCRACY .......................................... 18
8.1 THE ANALOGY OF THE TROJAN HORSE ..................................................................................... 19
8.2 ENFORCED CHANGE THROUGH INFILTRATION ......................................................................... 19
8.3 THE WORD ―DEVELOPMENT‖ AND ROI.................................................................................... 20

9 COMPETITION VERSUS COOPERATION ......................................................................... 20
9.1 SWITZERLAND; EXAMPLE OF SELF-SUFFICIENCY DURING HARD TIMES ...................................... 21
10 THE WESTERN ILLUSION .................................................................................................... 21
10.1 SOME WELL KNOWN VICTIMS ................................................................................................ 22

11 SIMPLICITY VERSUS CONSUMER SOCIETY .................................................................... 23
12 SOME POSSIBLE OBJECTIVES AND CONCLUSIONS .................................................... 23
OF GOODS THAT ARE BENEFICIAL TO SOCIETY AND ITS PEOPLE .......................................................... 23
12.2 CLEAR STRATEGY TO DECOUPLE FROM THE OIL DEPENDENCE ............................................ 24
12.3 DANGERS OF PRIVATISATION OF PUBLIC INFRASTRUCTURE ................................................. 24
FIRST LANGUAGE AND IN BIGGER LETTERS THAN THE ENGLISH TEXT. .............................................. 25
IN SOCIETY. ......................................................................................................................................... 26
12.8 RE-ADJUSTMENT OF PUBLIC VALUES ..................................................................................... 26


PROMOTION AMONGST ASIAN FELLOW COUNTRIES ............................................................................ 27

13 PERSONAL WORD ................................................................................................................... 28
14 APPENDIX 1 ............................................................................................................................... 30

APPENDIX 3 ARTICLE ON U.K. PRIVATE DEBT SITUATION .............................................. 65
APPENDIX 4 ENVIRONMENTAL COMPANIES IN AMERICA ............................................... 67
AIR CAR ................................................................................................................................................ 71

APPENDIX 6 ........................................................................................................................................ 74
GLOBAL FINANCIAL SYSTEM ....................................................................................................... 74

APPENDIX 7 THE ANNIHILATION OF THE NATIVE AMERICANS ................................. 105


1 Introduction Summary

This report is an analysis of the situation and the recent developments in the Kingdom of

This writing is intended to clarify some facts and aspects that are presented to general
public in a different appearance. It shall increase the understanding and the awareness of
the dangers born out of present situation and outline the directions that need to be
focused and addressed.

There is the need to act since already a lot of damage has been done and long proven
well-functioning structures have been destroyed and replaced by short term revenue
generating, mostly populist formulas that are unlikely to stand the test in time. It is
essential that intelligence gets back into the position of governing the country on behalf
of the welfare of most which is not only measured in economic figures of growth and
revenue generation.

This is not about the accusation of single individuals or groups of people. It is about the
invisible abstract structure and system of power, which can be either used to benefit or
enslave a society.

Present days objectives of business oriented growth, revenue maximisation,
internationalism and globalisation are a deadly trap to society, if they are not approached
with the clear understanding of what they really represent and the discipline to reject
what is part of the deceit. Otherwise it will lead the next generations straight into a for
the moment still neatly disguised mental form of slavery.

There is no geographical limitation in the interest of the herein described subjects and
mechanisms as they do not only concern the Kingdom of Thailand alone. They are
found on many levels in nearly all regions on the planet during the present days, as they
represent a paradigm of thinking.

This text is intended to be freely distributed; it shall inspire point out the directions that
need to be addressed. The reader is invited to study and verify given information by
himself and will find more basic information in the appendices concerning the rather
comprehensive subjects


2 How local promoted globalisation and internationalisation is impacting and
transforming the Kingdom

The Kingdom is under heavy attack, the worst in its history.

The face of the enemy looks familiar and seems trustable in the way it is presented in the
populist campaign that is omnipresent in nearly all media’s. As in other places on the
planet the battles are fought on a slow timeline manipulating the minds of the common
folks and working on the durable transformation of society.

„Development― as the general term of justification for changing the existing system
according to the needs of the new „would like to be masters― who serve the unseen
exterior forces in the background.

Well operating infrastructure that was built and optimised over years is suddenly declared
to be not good enough anymore, dismissed and replaced by new mechanisms which
hardly deliver any other recognisable output.

If those newly implemented mechanisms are a real betterment to society or not is very
difficult to decode and understand by an average educated and experienced person
belonging to the broader public.

For sure one can say that the cutting down and replacement of the old structures
increases the stability and powerbase of the new established leadership.

Should the newly made changes even affect the personal welfare of a certain group in the
population, the position of the new rulers are further strengthened and nearly anything
will be tolerated by the people; for the moment.

This is what it is all about: the moment. Or more precisely; the moment of build
momentum, to change and transform the structure of society in a hardly reversible way.

2.1 The new set of values

What in Thailand is sold and propagated through the media channels as the desirable
values of a developed westernised culture is in fact no culture at all.

It is the by professional marketers artificially created picture, promoting the values of the
American consumer market model.

Today we face what is called a multilevel marketing and public relations attack in which
the new mindset of what should be desired by the ordinary folks is endlessly transmitted
in many variations over and over again by nearly all media channels.

This is done to ensure that the new set of values becomes as widely accepted by the
people as possible, so that the majority soon thinks of it as new normality. One
characteristic all of these newly propagated objects of desire have in common:

They all can be obtained in exchange for money as they are all sellable commodities.


The whole exercise actually serves the propagation of the importance of money by selling
the illusion that the human need for happiness and security could be bought with money.

The individual members of society are getting intensively indoctrinated and encouraged
to define their personality and self confidence over material goods that are for sale in this
newly created marketplace for consumer goods.

The whole set of values is propagated in broad advertisement campaigns and sold as the
new lifestyle that should be lived after.

Daily we are exposed and have to endure this form of psychological warfare on many
levels. The attacks reach from very blunt and obvious, to sublime and subtle attempts of
influencing our natural behaviour.

It is the art of how to enslave a collective of people without having to use physical

2.2 The mechanism of money

By imposing and establishing the mechanism of money as the one and only measurement
of things and primary focus of interest in a society, the society will be soon robbed of its
human values and therefore its true living quality.

The justification for actions, new rules and regulations, in such a system are always given
in terms of economical reasoning which is hardly understood by the common people.

Stock exchange tickers, economical figures and exchange rates run by on the bottom of
the television programs, whilst westerner dressed neat looking men and women fill the
air with important sounding words to deepen the impression of relevance of the new
invented subject.

The appreciation and honouring of the living universe as the highest value in existence is
replaced by the book values that assign man made importance in form of a price to
whatever can be thought of.

In such a society, the individuals have become a freely disposable commodity called
human resource. Such a society does not serve the people anymore, far more the people
must serve a system which is controlled by a few who live on cost of all others.

3 Understanding the intentions

Nowadays, Thailand is battered again, similarly, as during the attacks in the foreign
exchange market during the financial crisis in the 97, when some traders of large
international investment banks sold off the Thai Baht in the spot markets to force the
national bank to use up to over US$ 20billion of gold and foreign reserves in their
attempt to support the Thai Baht in the FX market. National reserves where squeezed
out like a lemon.


During that time it was hardly understood to full extent what was actually happening,
since none of the responsible persons ever witnessed such a situation in their live time
nor had any knowledge of the possibility of the occurrence of such an incident.

It was the first time in history and only retrospective analysis at a later point in time after
the damage had been done revealed the true picture of what had really happened.

In purely profit oriented capitalism any opportunity will be used to drain wealth from
someone else and assign it to the own profit and loss book.

3.1 Strategy and tactics

In warfare it is essential to understand, besides the strength and weaknesses of both, the
own and the enemy forces, also the exact battle ground. The terrain will define the
possible moves of the combatants.

If one is not familiar with the ground one has a hard stand and will most likely loose the

In case of a surprise attack the defender can not choose the battleground and has an
incremental disadvantage in the first encounter since the attacking force will have
thought carefully about its strategy and the tactics to ensure its victory.

The second encounter should not come by surprise since one should know there is an
aggressor out there. The attacked position should therefore move to optimal ground for
defence. This can even mean to withdraw to a place where one is not exposed to the
enemy’s hostilities

Choosing the ground of a confrontation is like setting the rules in a game and can
sometimes, as for example in the case of Switzerland during the first and Second World
War, even prevent to be attacked.

3.1.1 Switzerland; example of successful independence

The Swiss strategy was, in the case of a predominant attack, to withdraw forces and to
hide out in the prepared high mountain strongholds.

It was planned to then engage the enemy in ongoing guerrilla warfare. Closely supported
by the Swiss civilians the army forces would have operated from the high mountain
bases, using guerrilla tactics.

The price to pay for an occupation would have been far too high under these
circumstances. Switzerland’s government and the general staff at that time believed in its
own vision and dared to follow its own way; with the outcome to have survived, as a
nearly undamaged island in midst the devastating destruction that the two world wars
caused throughout Europe and the world.


4 Governance in times of hardship

In times of hardship it is essential that leadership is not just the follower of an external
force or sticks to its only known approach.

It is of crucial importance to gain a clear understanding of the situation from all thinkable
points of view and simulate the possible scenarios and outcomes.

An unbiased evaluation will reveal the way that is most favourable in terms of achieving
the set objective. Strategy and tactics will be accordingly defined implemented and

However, the rules are the same for the abstract battles fought in today’s global trade and
propaganda wars, as in the escalation form of physical encounters of armed forces.

One needs to be aware of that when the ground is clear, another aspect comes into light:
The more exact one party of the battle knows the goals of the opponent, the higher is
the probability for success.

Meaning that the people who pull the strings know exactly the needs and desires of the
common folks but the broad public has no idea of the intentions or even the existence of
the ruthless ones that use the majority for their personal interests in power.

None should volunteer to hand over and submit its nation and people to the demanding
force as slavishly as it is done in doing now.

It is not enough to have a merchants mind set and hope to satisfy the hunger of the
exterior demanding forces by selling off the countries position and interests and play by
the imposed rules.

The sovereignty of the Kingdom and nation is seriously endangered.

5 The system of consumption and its tools of manipulation

Marketing and Public Relations are tools to influence and manipulate the opinion and
behaviour of a broader audience.

They are intended to shape the commonly accepted values in a group of people;

They propagate the things that seem worthwhile to be achieved by the single members of
this group.

In other days marketing was simply called propaganda.

The difference is that today’s ideological aspect is hidden behind the delusion of benefit
and comfort of the advertised material goods.

The major flood of consumer goods addresses the urge to satisfy short term desires.
After a while most of these items reveal themselves after a while as completely worthless
and even damaging to the society in the longer term.


They only serve one reason; to create dependencies and secure recurring income for the
selling side. Greed is artificially stimulated and increased by what is called marketing and
supported by the techniques of public relations, which aim to create a basis of acceptance
by the broader public.

The mechanics of marketing and public relations are ruthlessly exploiting the weakness in
the character of human beings as they address the basic mechanics of craving and desire

5.1 Standardised formulas of manipulation

One of the standard formulas that are thought while studying marketing is known as the
basic process of AIDA;

A =attention stands for creating attention for something, somehow
I = interest create interest in what is promoted
D = desire create and increase the desire for what is promoted
A = action make people act and buy what is promoted

Today marketing and public relations are ruthlessly used to establish the Americanised
consumer market and present these new values through the media channels.

It is using the low-level mechanics of craving and desire and works with all thinkable
subtlety. The media campaigns aim to transmit an illusionary picture that wants to make
public believe that the new live style values are already accepted by general public and are
the new objectives in society.

The psychological momentum of enforcement is leveraged, using the natural need of
most humans to be accepted by the group they feel they belong to and share the
collective values and customs accordingly.

The mobile phone mania shall here be given as an example to show effective suddenly
cheap technology and coloured plastic has become a major object of desire and status
symbol in broader public.

From monks to farmers, teenagers to westernised city men and modern consumer ladies;
it seems that nearly all demographic segments are impacted by this phenomenon.

Besides the exorbitant revenue of the mobile phone producers, the network operators
are in an even better position;

From the point of view of a marketer, a nearly perfect business case, since millions of
private people and companies pay on a recurring basis, a direct share of their income into
the pockets of the mobile network operator companies.

Besides the immense marketing and public relation campaigns that are run, the reason
for the epidemic nature of this business case is because it directly addresses and exploits
the natural human need and desire for social interaction and communication.


The system of consumption and greed as the basic motivation for personal action is
introduced and gets deeply rooted with the establishing of the consumer market and the
credit facilities that go with it.

5.2 The objectives of spending

The objective of this development is to make people spend as much money of their
personal income as possible for new things that they are indoctrinated to buy.

Modern marketing and public relations are enabled and transmitted through the media
channels directly into the mind of the unsuspicious average person who perceives the
words and pictures without assuming the sublime subtleties of indoctrination.

If something is needed or not; or even harmful to society and its members, is of no
interest as the techniques of marketing and public relations are not concerned with the
content they promote. They are the instruments to create desire for whatever it is
promoted and bare any ethics or morality

Not unlike a handgun that by itself is neither good nor bad and fully dependent on the
intention of the man who holds the weapon. On the other hand one has to state, that the
handgun was invented to take live and this is the main the reason for its existence.

6 The creating of dependencies

People are ruthlessly manipulated and made believe that they have the need for the newly
propagated things and the ever repeated opinions and views sink slowly into their minds.

At the same time money is made easy available and is being distributed to the consumers
to ensure that the market momentum can be optimally utilised. Private spending on
credit is preferred, so the market can grow even faster; like a fire burning in dry woods.

This means that as many people as possible will be supplied with some kind of credit.
This may be in form of a mortgage, consumer credit, loan, credit card, or other any other
deferred payment scheme.

In general public especially children, young adults, ambiguous people and women are the
targeted audience of the marketing campaigns, as they are easy prey for the professional
marketers and manipulators.

Soon there is a critical mass of followers created that believe the new imposed pictures
and adapt the new way of material live that is celebrated in the advertising campaigns

Intelligence is now asked to act, since the by the material goods and its equivalent; the
money, deceived part of the population is blinded and assured in their right doing by the
permanent indoctrination of some local and international media channels and the
illusionary perception of the westerner world.


6.1 Consumer markets and the supply of money on credit

The consumer market aims to drain as much from private individuals as possible and is
just one battleground on this multilevel attack.

This time it is not the national currency that is in the focus of the attack, it is the private
individual that is targeted and is psychologically enforced to increase its spending
behaviour and even is encouraged to take personal debt for his consumptions.

The maximum of cash low must be generated in the limited time given until the bubble
of illusion bursts like in Europe and the betrayal on the working people reveals itself to
public after the bill is presented.

Debt brings revenue to the lenders in form of interest rate payments, may this be a
private household or, on international level amongst countries and global institutions.

It’s all about creating dependencies on all levels and can be recognised as part of a
comprehensive strategy of the old and new imperial forces.

As well as a single individual will become dependent to the lender, so will the country as
a whole.

For a more comprehensive understanding of the monetary systems and their originators
the appendices are recommended to be consulted on this subject.

6.2 European facts

Scenarios of social upheavals like in France are most likely just the beginning of the
developments in the old capitalistic world, since those countries infrastructures and the
welfare systems, such as for example for pensioners, are falling apart and slowly dissolve.

These kinds of developments are usually accompanied with social unrest. The strategy of
the armed forces of countries such as Switzerland are assuming and addressing such
scenarios as the most likely danger from a military perspective, since several years in their

Many western countries will need to increase their debt and take more credit in term to
finance their household deficits

Germany as an example just announced that the new finance strategy will be to increase
debt in order to fund the 38 Billion gap in the national household, since the deficit can
not be managed anymore through tax increases or further cuts in expenditure. There is
the ―hope‖ that it might get better next year.

What reads like a joke is bitter reality and since finance politics is mostly based on vague
hope and populist political campaigns. Actually the households of the westerner
countries are de facto bankrupt even though they have a huge output on services and


The debt of private households in the United Kingdom alone is bigger as, the debt of the
whole of South East Asia and presumably over 1000 billion! Pound’s Sterling.

Like in an imagined card game, where there are only bad cards in the game, but all
participants bluff and just hand their own bad cards further to any one new, sitting down
on the card table wanting to play with them. Foul apples in a box.

Since under Abraham Lincoln, a legendary American president, the first US treasury bill
was auctioned, the financial systems have evolved through many stages and are today
ultimately dominated by one figure; the yield of the 30 US treasury bond; where the
American government borrows money from selected lenders and claims to be a first class
guarantor even though all figures are negative.

Since the failing of the gold standard (Bretton Woods) the yield of the 30 year US
treasury bond has become the benchmark and mother of all figures in the global interest
rate framework and therefore financial and capital markets.

This means in simple terms that all other economies and currencies on the planet are
measured against the non-real value of a figure representing the borrowing from the US
government which has actually a huge house hold deficit and therefore would it be a
private household bankruptcy would be declared.

The whole world order is a bluff and international trade and monetary systems an
accepted agreement that only is valid as long as the participants
believe in it.

Please be so kind to consult the appendices for further explanations and conclusions,
regarding the rather complex subject of global finance and monetary policies.

6.3 Enforcement through international trade agreements

So called international trade agreements, which in fact are restrictive, American interest
protective rules, are formulated and implemented.

What will follow is besides the already severe dependencies on oil and the global interest
rates development’s, speak the currency markets, an increased limitation in import and
export policy freedom. Successively more and more binding rules that not really benefit
the country are imposed on the national economy and the foreign grip gets tighter.

The aim of so called free trade is to open the gates for import of mostly unnecessary
products into the Kingdom and take out what is of value.

Historical analogy is the trading of coloured glass, weapons and alcohol for gold and
precious stones by American and European imperialistic forces with the native
inhabitants of the Americas.


Unfortunately the greed of the white conquerors could not be satisfied by handing over
the objects of desire to them and within 200 years the European intruders decimated the
native Indian tribes by approximately the number of 30 million in the Americas. Exact
figures cannot be obtained and for further information please consult appendix 5.

In half of that period namely 100 years the European Settlers who formed the United
States of America, killed over 840 million! Buffalos and nearly extinguished the whole of
their population.

However, this is just to give a brief example of the un-masked furious force we are
dealing here with.

7 The battlefield of global markets and international trade

Today’s battlefield is called the global market and international trade.

Under the cover of these standing expressions countries are forced into dependencies of

To open the countries market to the global free trade is literally handing over the own
territory to the enemy who ruthlessly will exploit it.

It’s like filling your house up to the roof with firewood, then inviting the fire for dinner
and being surprised that all it burns down.

The fire of capitalistic transformation burns slower than its real counterpart, but with the
same merciless hunger to consume whatever can be absorbed to extend its live.

Yet slowly the growing group of with money deceived and through so called new
economy enabled class of consumers help willingly to support their manipulative masters
and help to transform the culture of old.

CEO’s and CNN become the new celebrated idols of a world that is not understood and
blinds the new believers with the short term material illusion of betterment.

Slowly but steadily dependencies increase and things become increasingly more
expensive while at the same time quality lowers as we have seen in Europe over the last
two decades.

Soon everything will either have a cost or a price assigned to it and the society will be
split in different groups, since greed is unleashed and extinguishes the extended family
approach of the Thai high culture.

Things that have been free for thousands of years will be newly packaged and become
sellable products that suddenly cost money.


Imposed man made importance, of unnecessary things, slowly start to occupy the minds
of the people who are exposed to permanent brain washing of advertisements in the

All given objectives and reasoning for so called modernisation and developments will be
translated into, and measured in terms of monetary gain, speak profit

7.1 The European requirements

For the European economies expansion into new markets is a question of survival and
they are with the present leaderships condemned to be more or less willing followers of

Countries like England and France are economically on the ground and their public
infrastructure is literally falling apart.

They desperately need new markets to exploit for their own survival as the free lunch
they stole from the colonies is not available anymore.

Until one hundred years ago the European imperialistic forces served themselves freely
with whatever they desired from their overseas colonies.

These unfortunate occupied countries where convinced to cooperate by superior
firepower and in many cases ruthless brutal behaviour.

Slaves from Africa and South America, the first human resources; gold, silver, copper,
silk, precious stones, tea, cacao, whatever one can think of that can be sold. That is what
made Europe and America rich until a hundred years ago.

Now the colonies are (officially) gone and poverty comes back to Europe since these
countries have naturally very little to offer by themselves.

In historical past the durable colonialist transformation of country usually took about
two generations until the new living circumstances where accepted as new normality,
resistance merciless broken and the old culture degraded to become an exhibitions item
in the museum.

Today, all what is left are folkloristic acts to attract foreign tourists and get hard currency.

Intellectuals and ruling class in overtaken and transformed countries such as e.g. Sri
Lanka, became just suddenly either the paid companions of the new masters or the
overhauled bystanders and in a new changed world order.


7.2 Vision and leadership

For centuries the wise rulers of the Thai Kingdom knew how to keep stability, and
develop the country in those aspects that brought an added value and benefit to the
people of Thailand.

They observed other nations and took what was worth taking and rejected what was
useless or of danger to the community.

Successful leadership is based on intelligence and foresees the future developments and
acts in an impeccable way to secure the interest of society and nation.

The future generations will have to live with the present day’s decisions and actions.
There is no space for weakness and misconception in governing the Kingdom.

A system must serve the needs of the society and its people and shall not be abused to
become a tool to enslave most just to serve the desires of a few.

Leadership shall have the primary objective to ensure the highest possible quality of
living for its subjects in accordance with the environment and under the taking into
account of the aim for sustenance and stability.

In equality we come and in equality we go. In between there lays man made difference
that nowadays is artificially increased by mechanisms of a consumer society and abuses

Everyone needs food and drink, a shelter to sleep, a place to live, daily work to do and a
social environment that cares for each other and wherein he or she can develop his or
her potential in live time. This is the relevant framework in which existence plays.

It is up to leadership to truly create a beneficial environment for its subjects and protect
their interests

Just as the great Kings and leaders of this beautiful country have done, up to the present
days of confusion and delusion.

Thai means free and this is what the land shall be in future; not just the humble servant
to foreign forces and finally another ―colony‖ to exploit.

Thailand has most likely the highest living standard by the means of freedom and
happiness in personal human development on this planet in present days.

A unique society that has optimised the art of wellbeing; the whole world can profit from
the model of the art of living and being, if the Thai people only would realise the value
they hold within their culture for the whole of mankind that is at the verge of disaster.


7.2.1 Sweden; example of targeted oil-free economy

Sweden shall be given as a most recent example for constructive decision and vision by a
decisive change of the course of the country in the interest of its people;

Sweden plans to be world's first oil-free economy in 15 years and switch to renewable
energy without building a new generation of nuclear power stations.

The attempt to become the world's first practically oil-free economy is being planned by
a committee of industrialists, academics, farmers, car makers, civil servants and others,
who will report to parliament in several months.

According to the energy committee of the Royal Swedish Academy of Sciences, there is
growing concern that global oil supplies are peaking and will shortly dwindle, and that a
global economic recession could result from high oil prices. The price of oil has tripled
since 1996."

7.3 Education versus indoctrination

Finally since a Masters Degree in Business Administration or Marketing is valued higher
in present society than intensive many yearlong religious studies of Buddhism, the
downfall of society is sealed.

The whole education system gets turned over to slowly become an indoctrination
machine and all the change is again sold under the nice sounding advertisements of
modernisation and development.

It seems crazy and unhealthy for a society to assign top status to the fields of study of
knowledge that is basically just concerned with ―how to sell something to someone else
with profit‖ , instead of real sciences such as medicine, biology, agriculture or the
wisdom that gets generated out of religious studies. One should think it is obvious that
this cannot be of benefit in long term to any society.

The so called modern western education, especially the American model is pure
conditioning and training to become suitable ―human resource‖ or with a university
degree ―human capital‖.

The education factories are the place of primary programming in a society where either
cooperation or competition is thought.

In present days, the least things advertised are of integrity and are really what they claim
to be, since the main objective is to sell for money and create profit.

In education this means that suddenly a lot of expensive programs are promoted and
sold to the eager and ambiguous learner who has best intentions; they carry fancy names
that promise importance, cost a lot of money and may be even abroad.

Like the brand names of luxury goods in the consumer market they not really are
concerned with benefit to society as they far more intended to increase the prestige of


the person that has endured them and thereby has bought his initiation and way into the
new guarding class of the consumer society.

There are basically two kinds of directions that can be studied today:

1.) All the various classic sciences and arts that are concerned with under-standing the
world we live in and /or bring betterment to the people or;

2.) The teachings that are concerned with the man-made importance of money and trade;

These latter subjects always translates back in one or the other way, into influencing and
manipulating single individuals, groups of people or whole nations for the own,
respectively employers, financial benefit.

Examples given here are today’s fashionable directions of study such as; ―business
administration‖, ―human resource management‖, ―marketing ―, ―public relations‖ and
related fields.

It is a misconception to equal the second category of teachings, which are concerned
with artificial man made importance, to real science which concerned with the
understanding of the world we live in.

It is of very big importance that this is understood correctly. This does not mean that
forms of study should be prohibited or restricted but the knowledge of merchandising
and finance related subjects are simply not a science and therefore do not deserve to
receive the present status in society.

Since these fields of subject are not concerned with real production and live from
―administration‖ or ―influencing‖, they soon tend to live comfortably on cost of the
ones that work in reality.

Basically it is the system that was used in colonisation and administration by the English
Empire, that has born these directions of study. They still work with the same old trick
of what finance is all about:

‖You give me your time and labour for what I command you to do and I give you some
printed piece of paper that you can exchange for material goods and buyable services;

People with a higher degree will usually receive higher payment and build the class that is
presented in the media’s as the winners and happy smiling consumers.

The non-degree holders and native speakers get indoctrinated through the media pictures
that there is a higher class of modern people that speak a foreign language and live a
―modern ―live. It seems in television as if they where second tear even though they are
the soul of the country and the working force in reality.

This is one of the tricks of how to separate what once was one society of brothers and
sisters and fuel the competition amongst each other’s in a world of plenty.


The aim is to weaken the natural human society and replace giving and sharing with
taking and selling. Within few generations everyone will fight for himself in this
illusionary battle of live that only benefits the ones who pull the strings behind.

It is all about serving one reason: to lead and keep the collective of people into the
delusion of craving and desire, which gives money its importance and keeps
consumption running.

One must be cautious and selective in what is educated, not by restricting subjects but,
steering by increasing the status and credibility of what is worth to be studied.

A father should not let his children drink deadly poison just because the kids want to
drink from the attractive coloured bottle that the poison is kept in

8 The true nature of capital driven democracy

Imposed capitalistic democracies are of illusionary nature as the true intention is not
primarily to contribute to the welfare of the people, but far more to serve as bridge head
for the intruding capitalistic market force.

One could say it is a flank attack, since the intellectual voices that wanted liberalisation
and the establishing of a democracy get what they asked for and are silenced. It is
unlikely that they speak up against the system they proposed to invent and fought for.

In reality they opened the door for unpredictability, as power becomes buyable and they
now will be betrayed in the second line by the characters that are attracted by power and
money. Many of the so called democracies are in truth no real democracies but far more
capital driven governance bodies.

A capitalistic democracy can serve as the perfect platform for the ones that have the
capital to run efficient media campaigns and buy the voters.

From that moment on a democracy has become a farce and a disguise for dictatorship in
the name of capitalism.

With the end of the total monarchy 74 years ago the new system evolved through various
changes slowly transforming the society.

Also the presence of different foreign military forces since last century left and leaves
their marks and scars behind.

The American troops enable (d) with their money the first big scale capitalistic business
case in the country. Until today a whole town attracts foreigners throughout the world
for only one reason and is known best in English language as „the hole― of Asia.

Since the creation of democracy, there seems to be no more centralised intelligence,
taking direct influence in the beneficial development of the country. Ethics and morality
are no more major subjects of interest and the old society is falling apart if no action is


Colourful stupidity is packaged and transmitted to the youth through some television
channels that make their money with propaganda for their sponsoring brand names.
Straight into the mind of the next generation.

Money and therefore all that is buyable has become the untamed ruling force.

8.1 The analogy of the Trojan horse

Today we find ourselves in the same situation as the poor citizens of Troy in the old
traditional version of the Greek classic story: the Trojan War

The war lasted 10 years, and ended finally when the Greeks pretended to withdraw and
give up, leaving behind a beautiful large wooden horse outside of Troy’s city walls.

Despite the warnings of some wise persons, the horse was taken inside.

Inside the horse, Greek warriors where waiting until night time, then emerged from it
and opened the city's gates to the returned Greek army, who then ransacked Troy,
massacred its men, and carried off its women.

In western understanding the term Trojan horse has come to refer to subversion
introduced from the outside.

One can say that the enemy forces have infiltrated the Kingdom in disguise and opened
the doors of the city walls to the foreign army.

8.2 Enforced change through infiltration

Invaded not by physical armed forces, far worse;

In disguise of development and the need for internationalism; agreements and treaty’s
that will enforce external dictated governance upon for the countries health vital

Imposing step by step new foreign dictated dependencies that cannot be controlled from
within the country and directly endanger the sovereignty of the Kingdom.

It is a blunt lie that economic systems must achieve growth at any cost and that therefore
competition is need. This is the basic westerner indoctrination which is bare any logical
reasoning. It is constructed around the core of the biggest fraud on mankind; the time
value of money. In other words; interest rate payment in any form.

Furthermore it is a frank lie that there is the necessity for internationalism, free trade and
globalisation in terms to have a prospering outlook into the future.

Already now there is a growing class of semi intellectuals that studied (not seldom
abroad), business administration, marketing or a related field. They are in the top class of
monthly salary receivers, proud of it and in the best case believe, what they learned is for
betterment of society.


This is the bridgehead in society for the transformation into consumer slavery, as they
mostly likely will be the followers and internal promoters of the economic propaganda.

8.3 The word ―Development‖ and ROI

Today’s so often universally used phrase that we have to „develop― has always to do with
investment and therefore with its shadow and influential bother the so called ROI; the
return on investment; nothing will be given for free and all is well calculated; cunning, ice
cold prediction.

In economy and modern society the word „development― has been perverted and is
abused to its core.

„Development „ could mean something good, but it unfortunately in present times will
always translate back to return on investment, what means: the money returns will be
developed at the cost of the people who work.

At least the term of „human resources― reveals by itself its disregarding meaning by
positioning human labourers on the same level as coal, oil, gas, gold ,iron or copper who
are usually referred to as resources.

Like somebody who pretends to be a good friend and gives with prediction as much as
is necessary to be fully trusted and then when the time is ripe and the opportunity arises
will show his real face and as much as is possible.

The motivation behind any form of action must be understood to evaluate if something’s
meant constructively or selfish egotism.

9 Competition versus Cooperation

Whoever thinks he must compete with others instead of following a cooperative
approach aiming to achieve a stable system with primary objective to ensure sustaining
high living quality for its people, has missed the point of successful leadership and

A system must serve the needs of the society and its people and shall not be abused to
become a tool to enslave most just to serve the desires of a few.

Therefore leadership must serve the long term benefit of the country and its people and
there is no place for egotism or the will to set oneself a monument.

Throughout history we have seen that successful leader ship has the understanding of the
past and presence to derive its visions from it and create a prospering future for the next
generations to come.

Impeccable integrity is needed in times of hardship. It is not enough and even very
dangerous to follow the mainstream in second row waiting; It is deadly to adapt the rules
and regulations of a system that is obviously closer to its end as to the beginning of its
living cycle.


9.1 Switzerland; example of self-sufficiency during hard times

During the Second World War Switzerland survived in the middle of the raging madness
of destruction in Europe only due to its defence policy paired with neutrality that
rejected outside interests.

As food was short, potatoes and vegetables where planted on every free space in the
large cities and everyone from the countryside to the capitol helped to contribute to run
the county on a self-sufficient basis. This was a crucial factor and enabled Switzerland to
keep its sovereignty.

Internal stability and self-sufficiency must be of primary objective as this is the basis
ensuring sovereignty and independence of the state and its subjects.

Pharmaceutical Generic’s as an example shall be freely produced and traded, since it is a
crime to withhold any form of invention for betterment for human beings from the rest
of mankind because of monetary profit oriented thinking.

Any rule on international level that does not make sense in respect of bringing
betterment to the nation and its people shall be over gone in ―laissez fare‖ mentality with
a smile.

Copyrights and trademarks are just other mechanism to drain money form the poor and
secure more income for the ones who invented these rules.

We should stop accepting foreign imposed paradigms of limitation in thinking and start
unfolding strengthened cooperation with our neighbouring countries since the
background is one of a kind.

10 The western illusion

Take a close look at the countries in the west and the true living standards and
circumstances of the average working person.

To be able to understand the dark side in its present appearance, one must be familiar
with the historical facts and understand the motivation behind the developments in
various fields of focus.

Europe has a history of more than 1000 years of war and manslaughter and only come to
a rest in the last 58 years after what so far was the climax of monotheistic insanity; the
second world war.

It is a history of power struggles amongst Kings, Kaisers and religious leaders such as the
Pope and the Bishops, most of them obsessed by lust for power and the least interested
in the welfare of the ordinary folks.

Westerner Religion is used to control the masses by indoctrination of fear of hell and the
hope of heaven after death.


Endure your live and hope for heaven. If you not do as we command you will go to hell,
so therefore be obedient; that’s how the clergy ruled the European folks for centuries.

Instead of being a save harbour of wisdom and integrity, assisting the ones that can not
know and therefore must believe, the clergy where the bystanders and even originators of
mankind’s biggest cruelties and horrors in the past

In present days the permanent conditioning and brainwashing of the masses through the
media channels has replaced the preaching of heaven and hell and does it the new way,
keeping the folks on an uneducated level fostering desire and craving.

Forms of wisdom and knowledge that assist man to unfold his real potential to become
what can be truly called a developed human being has in the West been suppressed and
merciless hunted down throughout the centuries since the roman-empire.

10.1 Some well-known victims

People who dare to speak up, and stand for impeccable truth are either killed or ridiculed
during their live time.

Sometimes, if their story is of undeniable of interest to the masses, they are made heroes
post mortem and hollies by the powers that actually murdered them.

Most prominent example in the west is probably Jesus, who got nailed to a wooden cross
for his non material believes in love and equality.

Mohammad, had to leave Medina because the money culture wanted to see him dead as
his believe in one god offended the merchants who were frightened this might have a
negative influence to the trade.

The Greek philosopher Socrates, who invented democracy, had to commit suicide, whilst
other great thinkers such as Epiktet have been ignored and are simply unknown by the
fast majority.

The systems of money culture will most likely first try to buy before it kills.

Martin Luther King was shot dead for his impeccable believes whilst nowadays ―black
gangster‖ rappers just sold out and have become besides Mac Donald’s the Cultural main
export of the United States and the most favourable pets of American non-culture

Single people or a whole nation, the way of escalation is the same.

The value based money system needs greed as driving force to keep its momentum and
secure its existence.

There greed is artificially created and fuelled by the modern tools of Marketing that is
transmitted through the media channels right into the perception of the people.


11 Simplicity versus consumer society

Whoever calls simplicity poor and propagates the backwards development of a stabilised
in general happy society into a greed driven nightmare of competition where the value of
dead things is measured above the worth living beings; where families are kept small,
children grow up on their own because both parents have to work or are separate and
where elderly people above 50 are disposed and thrown away in society because the age
insurance is too expensive to an employer, is a traitor on the interests of the whole of
mankind and the creation.

Hereafter is an example on how ―living standard‖ is measured by westerner (US) means:

―The standard of living in the United States is one of the highest in the world by almost
any measure. Americans are top in the world for most material possessions. The
numbers of televisions, vehicles, and other such products per person are considerably
higher than in any other country. For instance, the United States has some 754
televisions for every thousand people; no other major state is even above 700,
with Japan being closest at 680/1000.

It should be obvious to anyone that it is ridiculous to measure development and ―living
standard‖ in terms of how many televisions or mobile phones per 1000 people are
existent in the population.

Thailand has one of the highest living standards on this planet in present days, is located
in midst beneficial nature and has a thousand’s of year old optimised system to stabilise
its society and foster comfort in mind.

As a matter of fact from an outside inside view, it is not the world that can give much to
Thailand, but far more reality that Thailand has a lot to over to the world. If only Thai
people would realise this fact and keep their natural modesty and emphatic culture
grounded in nature.

12 Some possible objectives and conclusions

Here after are some possible objectives that seem worthy to be realized in a human
society and furthermore some recommendations that seem essential in terms of ensuring
the sovereignty of the Kingdom.

Outlined subjects are not given in order of priority and are mere sketches of inspiration.
Gladly there will be given in depth information regarding any possible solution on a
separate basis of communication.

12.1 Priority of self-sufficiency in food and medical supply and unrestricted trade of
goods that are beneficial to society and its people

The main priorities should be focussed on agricultural output which takes the old natural
knowledge into account. Also ere, even though the objective should be to become a main
food exported in the region, the motivation shall not be based on pure monetary profit


thinking, but far more on considerations like demographic developments of the own and
the surrounding countries with a tie horizon of minimum 50 years.

To re plant what is cut down and not to exploit and damage the environment above its
tolerance levels is essential for future survival.

Especially in the south of Europe there are many examples for whole regions that have
eroded surface, are bare any tree and have become desert like environment, just because
the big natural woods where exploited and cut down.

The rain washed out the minerals and now nothing will grow anymore in that soil.

12.2 Clear strategy to decouple from the oil dependence

It should be clear by now that it is not beneficial to depend on a oil based economy. The
oil prices tripled since 1996 and wars are thought about the domination of the regions
that contain this resource.

Like the earlier on given example of Sweden, it is recommendable to start initialising a
shift to alternative

Sweden shall be given as a most recent example for constructive decision and vision by a
decisive change of the course of the country in the interest of its people;

12.3 Dangers of privatisation of public infrastructure

This is the similar principle of squeezing wealth and reserves out of the nation as during
the Forex crisis in 97.

The difference lays therein that due to playing the game of internationalism and
globalisation abstract figures such as trade balances and household deficits become major
point of focus in the international media and politics arena.

Politicians are tempted and easily lured into the trap of selling public infrastructure into
the private sector with the argument to boost economy. This is nothing else than
liquidating public value to finance the foreign requirements in the global markets. After
privatisation there is no on-going service or quality secured. As soon as the national
economy gets milked again in the global financial market, the once functioning
infrastructure finally dissolves since the private sector.

Switzerland’s national pride, the once world famous Swissair went into bankruptcy after
privatisation and now belongs to the neighbouring country Germany. Mismanagement
had fatal impact under the new public market exposure of the share capital in the stock

There are many more examples that can be given. Especially the people in the United
Kingdom suffer from the impacts of the fashionable privatisation boom.


Underground and Railways are in very bad condition and have nearly daily outages that
cost the national economy due to missed working time millions of pounds.

The problem about privatisation is that public infrastructure, which is primarily intended
to serve society and the people, suddenly changes its objective, and must become as
profitable as possible for the new owner.

Thousands of jobs got lost in Europe in the process of that the new owners made more
profit from selling the once functioning structure in small pieces, than further running
the operations.

That’s probably the worst case since all that is left after such a called asset strip is the
profit in the books of the speculator.

As seen in Europe many times, where large factories that employ whole regions and
deliver good functioning, are ripped apart and sold off as there is more profit from that
than keeping the people employed and stabilising the living environment of the area.

12.4 Limitation of consumer goods advertisement in television channels and print

Television channels shall not primarily serve propaganda for consumer goods.

The content of the programs shall not be degraded to be mere carriers for advertisement
messages where stupidity and loudness is packaged to create attention and is part of the
earlier described AIDA process in marketing.

Same should be applied for the print media. The substantial part of content in a medium
shall consist of information, entertainment, whatever but not be only subtle and sublime
advertisement for consumer goods.

There shall be content that has information and is not repeatedly transmitting the same
messages trying to influence the market behaviour of the audience. Especially children
and young adolescents need protection.

12.5 Restriction of English text only in advertisements, mandatory that Thai is first
Language and in bigger letters than the English text.

France for example has a law that forbids the integration of English terms into the
French language. There is no acceptance for English terms in France since the French
believe that their own culture is worth keeping since there is no added value through
English, but that international products can be sold more easily.

Also none in Germany, Spain, Italy or Switzerland would come up with the idea to
permanently present English in the Medias presented as equal or preferable to the own
language and therefore heritage.

One’s language is ones cultural rooting and therefore grown identity.


12.6 Elimination of the Trademark advertisements on large shields along the road sites

The advertising on large outdoor panels is permanent ―brainwashing of the people’s
brain since one takes in what one sees. It seems unhealthy and ridiculous to see foreign
brand names such as Panasonic, Sony, Honda, etc. omnipresent all over the country
whilst the own identity, in form of Thai originated symbols such as the National Flag or
pictures of His Majesty the King are outnumbered by foreign symbols.

12.7 Addressing the problem of exorbitant salaries that create and deepen the gap in

Governance must be concerned with equality in its society. It is destructive if some
people, foreigners included earn monthly in excess of 100,000 Baht whilst in Uttaradit a
committed teacher after 10 years still today earns less than 4000 baht a month.

High incomes in the private sector should be heavily taxed to finance public services
financed that serve the common people in the areas of education, transportation and
health. As taxation is a comprehensive and delicate subject, this issue will be gladly
discussed in a separate paper.

12.8 Re-adjustment of public values

By using the existing media channels and techniques of public relations and marketing
the set of values can be re-engineered. Beneficial formulas of stability and endurance are
propagated through the medias in the same way as today the advertising of goods in the
consumer markets..

Like a poisonous substance that is normally causing pain and death, can be in the right
dosage and application a powerful medicine of cure the tools of marketing and
campaigning can help to shift back the set of to society beneficial values.

The main objective must be the long term stability of the system delivering output for
the welfare to the common people who build majority of society.

One negative influencer addressing the new semi educated class of English speaking
consumers in the large towns, are the international propaganda channels with their
financial news, judging all actions on the world through the eyes of the ruling monetary

They will condemn all action that is not in line with the power system of the
industrialised countries and welcome any puppet that serves the interest of money.

Only way is to educate and distribute the truth about the various systems and reform the
opinions by logical analysis and constructive reasoning, without becoming counter

Only impeccable truth that reveals in integrity the motivation of the power based
intentions can work as a cure.


12.9 Establishment of a Royalist Party with members of integrity and impeccable
interest in the welfare of the common folks and the sovereignty of the country.

This issue should be addressed by now.

Unless it is not already initiated, it is furthermore recommendable to consider, as in the
case of Sweden, to establish wider interdisciplinary committees (task forces) of scientists
and direct stakeholders to evaluate and create the future planning and strategy in certain
eras such as for example given in energy politics, agriculture and forestry.

Clear Strategies, tactics and plans for the next 25 -50 years should be created.

12.10 Reengineering of financial structures and increased bilateral talks and promotion
amongst Asian fellow countries

Stopping to sign enforced trade negotiations with the west and focus on cooperative
approach within Asian countries and Europe as they will have to cooperate.

Modern Americanised economy is like handing around bad cards from one hand to the
other. Pretending to have good cards in the hand for winning the game in the future,
knowing that the good cards are gone and only bad ones left in the game..

Since under Abraham Lincoln, the legendary American president, the first US treasury
bill was auctioned, the financial systems have evolved through many stages and are today
ultimately dominated by one figure; the yield of the 30 us treasury bond where the
American government borrows money from selected lenders and claims to be a first class
guarantor even though all figures are negative.

Since the failing of the gold standard (Bretton Woods) the yield of the 30 year US
treasury bond has become the benchmark and mother of all figures in the global interest
rate framework and therefore financial and capital markets.

This means in simple terms that all other economies and currencies on the planet are
measured against the non-real value of a figure representing the borrowing from the US
government which has actually a huge house hold deficit and therefore would it be a
private household bankruptcy would be declared.

The Asian countries should look up collectively at new scenarios for backing up their
currencies and / or explore the possibility of establishing an alternative monetary cycle
amongst them, to simply and seamlessly be ready to replace the enforced Americanised
financial system which originally was created to serve a small elite in New York and
London. Example given here can be the establishing of a precious stones backed up
currency system for the ASEAN, SAARC (concepts ready to be explained in separate
case study )

For clarification and increased understanding of the origin of present days finance
system, please be so kind to consult Appendix 5.


This issue is too complex as and therefore the ideas touched, here are sketches of the real

Intact nature will in future days become the highest value again on this planet, since it is
not replaceable by man and his machines.

There is a steady growing trend in Europe and America for environmental conscious
corporate’s in the stock markets (example Appendix 4)

It can be assumed that rating agencies such as Moodie’s or SP start to increasingly link
the criteria’s of sustenance and stability to their credibility ratings; shifting slowly the
markets interest from pure short term profit objectives to sustenance and stability in
favour of society.

Change can be created by transforming and re-engineering the general mind-set in the
markets the same way as in this report described, just with different objectives.

An Example could be the issuing of Bonds that are secured with a specified size of
ground of intact natural environment. Or agricultural land on which in traditional ways
with traditional methods rice is planted and therefore long time stable output is
guaranteed without outside dependencies or unknown risk factors, since thousands of
years’ experience.

Not how quick as much as possible like the Americans, far more as long as possible, as
much as possible, without reducing the overall stability and sustenance.

13 Personal word

As a conclusion out of past events in history, one can say that after the evolving and
failing of systems such as absolutism, industrialism, imperialism with its exploitations of
the colonies, planned economies in socialism and communism, now uncontrolled
capitalism comes far closer to the end of its living cycle than its beginning.

Change can be brought by using the existing structures and mechanisms of finance and
trade but re-engineering the insane misconception of competition and eternal growth in
economy into beneficial formulas of stability and sustenance of the systems delivering
output for the welfare to the common people who build the society.

Centres of intelligence should be established giving the politicians the directions of
movement as in the described case of Sweden’s decision to be oil free society. The
national Bank and foreign policy has to serve the concept of a self-sufficient economy
and enable the framework of 0 interest since time value of money is the betrayal on
mankind enslaving the world.

It is not favourable wanting to have as many as possible foreign investors in the country
or to sell ground or resources since this not serves the community but the greed of single


We have to withstand the temptations of modern times and act in a leading role for all
world nations by truly living up to the wisdom and truth according to our heritage and
understanding of existence.

It is the obligation of the ruling power to ensure a frame work in which as many people
as possible can live as good as possible.

Natural resources and environment must have highest priority since without intact nature
there no live is possible.

People who live in, with and from nature do not to be developed and mutated into
industrial slaves, far more are they to be seen as one of the highest values in society since
they protect and preserve what our living basis is. Their ways of living must be protected
since it is the nation’s asset for stability.

This can be achieved if the tools of marketing and public relations are used in a
responsible way for the benefit of most instead as for now as manipulating tools to
increase the greed in society to benefit a few who serve the fetish of power and money.

Some examples indicating the direction of study are given in this text and the appendices.
For nearly any situation there already exists a feasible alternative that could be
implemented if chosen to do so.

I have the deep confidence and that the wonderful people of Thailand under the
Leadership of their wise and foreseeing King, will create their way into a prospering
bright and independent future.

It is for me the most advanced high culture on this planet that myself was allowed to
encounter during my lifetime so far. If only all Thai people would realize what they hold
within their deep understanding of nature and existence.

In Expression of deepest admiration of His Majesty the King, the Royal Family and all
the free people, from south to north and west to east, across all barriers of today’s
nations; where ever Tai is spoken and / or the principle of the higher developed human
society is understood, still alive and followed shall be unity and vision generated to create
a prospering future.

Written by observer wandering the grounds of the Kingdom of Thailand during 2547 to


Specific analysis of each subject, possible scenarios and ways forward will be gladly
discussed in depth should there be any interest from official site.





The East Asian economic crisis is probably the most important economic event in the
region of the past few decades and for the next few decades.

Beyond this, there is yet no unanimity about its root causes nor about the solutions. The
differences of views are being debated in academic circles and reflected in the media.

One thing though is certain: the earlier optimistic expectation that it would last only
some months has proved wrong. Instead the financial crisis has been transformed into a
full-blown recession or depression, with forecasts of GNP growth and unemployment
becoming more gloomy for affected countries. Moreover the threat of depreciation has
spread from a few countries to many in the region, and is spreading to other areas such
as Russia, South Africa, and possibly Eastern Europe and South America.


The great debate on causes is whether the blame should be allocated to domestic policies
and practices or to the intrinsic and volatile nature of the global financial system.

In the first phase of the crisis, as it spread from Thailand to Malaysia, Indonesia, the
Philippines, then to South Korea, the international establishment (represented by the
IMF) and the G7 countries placed the blame squarely on domestic ills in the East Asian
countries. They cited the ill judgment of the banks and financial institutions, the over-
speculation in real estate and the share market, the collusion between governments and
businesses, the bad policy of having fixed exchange rates (to the dollar) and the rather
high current account deficits. They studiously avoided blaming the financial markets, or
currency speculation, and the behaviours of huge institutional investors.


This view was difficult to sustain. For it implied that the "economic fundamentals" in
East Asia were fatally flawed, yet only a few months or even weeks before the crisis
erupted, the countries had been praised as models of sound fundamentals to be followed
by others. And in 1993 the World Bank had coined the term the East Asian Miracle to
describe the now vilified economies.

However, there rapidly developed another view of how the crisis emerged and spread.
This view put the blame on the developments of the global financial system: the
combination of financial deregulation and liberalization across the world (as the legal
basis); the increasing interconnection of markets and speed of transactions through
computer technology (as the technological basis); and the development of large
institutional financial players (such as the speculative hedge funds, the investment banks,
and the huge mutual and pension funds).

This combination has led to the rapid shifting of large blocks of short-term capital
flowing across borders in search of quick and high returns, to the tune of US$2 trillion a
day. Only one to two percent is accounted for by foreign exchange transactions relating
to trade and foreign direct investment. The remainder is for speculation or short-term
investments that can move very quickly when the speculators' or investors' perceptions

When a developing country carries out financial liberalization before its institutions or
knowledge base is prepared to deal with the consequences, it opens itself to the
possibility of tremendous shocks and instability associated with inflows and outflows of

What happened in East Asia is not peculiar, but has already happened to many Latin
American countries in the 1980s, to Mexico in 1994, to Sweden and Norway in the early
1990s. They faced sudden currency depreciations due to speculative attacks or large
outflows of funds.

A total of US$184 billion entered developing Asian countries as net private capital flows
in 1994-96, according to the Bank of International Settlements. In 1996, US$94 billion
entered and in the first half of 1997 $70 billion poured in. With the onset of the crisis,
$102 billion went out in the second half of 1997. The massive outflow has continued


These figures help to show: (i) how huge the flows (in and out) can be; (ii) how volatile
and sudden the shifts can be, when inflow turns to outflow; (iii) how the huge capital
flows can be subjected to the tremendous effect of "herd instinct," in which a market
opinion or operational leader starts to pull out, and triggers or catalyses a panic
withdrawal by large institutional investors and players.

In the case of East Asia, although there were grounds to believe that some of the
currencies were over-valued, there was an over- reaction of the market, and consequently
an "over-shooting" downwards of these currencies beyond what was justifiable by
fundamentals. It was a case of self-fulfilling prophecy.

It is believed that financial speculators, led by some hedge funds, were responsible for
the original "trigger action" in Thailand. The Thai government used up over US$20
billion of foreign reserves

to ward off speculative attacks. Speculators are believed to have borrowed and sold Thai
baht, receiving US dollars in exchange.

When the baht fell, they needed much less dollars to repay the baht loans, thus making
large profits.

A report in Business Week in August 1997 revealed that hedge funds made big profits
from speculative attacks on Southeast Asian currencies in July 1997. In an article titled
"The Rich Get a Little Richer," the business weekly reported on the recent profit levels
of US-based "hedge funds", or investment funds that make their money from leveraged
bets on currencies, stocks, bonds, commodities.

According to Business Week, in the first half of this year, the hedge funds performed
poorly. But in July (the month when the Thai baht went into crisis and when other
currencies began to come under attack) they "rebounded with a vengeance" and that
most types of funds posted "sharp gains." The magazine says that a key contributing
factor for the hedge funds' excellent July performance was "the funds' speculative plays
on the Thai baht and other struggling Asian currencies, such as the Malaysian ringgit and
the Philippine peso." As a whole, the hedge funds made only 10.3 percent net profits
(after fees) on average for the period January to June 1997. But their average profit rate
jumped to 19.1 percent for January-July 1997. Thus, the inclusion of a single month
(July) was enough to cause the profit rate so far this year to almost double. This clearly
indicates a tremendous profit windfall in July.


In some countries, the first outflow by foreigners was followed by an outflow of capital
by local people who feared further depreciation, or who where concerned about the
safety of financial institutions. This further depreciated the currencies.

The sequence of events leading to and worsening the crisis included the following.

(a) Financial liberalization

Firstly, the countries concerned carried out a process of financial liberalization, where
foreign exchange was made convertible with local currency not only for trade and direct-
investment purposes but also for autonomous capital inflows and outflows (i.e. for
"capital account" transactions); and where inflows and outflows of funds were largely
deregulated and permitted. This facilitated the large inflows of funds in the form of
international bank loans to local banks and companies, purchase of bonds, and portfolio
investment in the local stock markets. For example, the Bangkok International Banking
Facilities (BIBF) was set up on March 1993, to receive foreign funds for recycling to
local banks and companies, and it received US$31 billion up to the end of 1996. South
Korea recently liberalized its hitherto strict rules that prohibited or restricted foreign
lending, in order to meet the requirements for entering the OECD. Its banks and firms
received large inflows of foreign loans, and the country accumulated US$150 billion of
foreign debts, most of it private-sector and short-term. In Indonesia, local banks and
companies also borrowed heavily from abroad.

(b) Currency depreciation and debt crisis

The build-up of short-term debts was becoming alarming. What transformed this into
crisis for Thailand, Indonesia and South Korea was the sharp and sudden depreciation of
their currencies, coupled with the reduction of their foreign reserves in anti- speculation
attempts. When the currencies depreciated, the burden of debt servicing rose
correspondingly in terms of the local- currency amount required for loan repayment.
That much of the loans were short-term was an additional problem. Foreign reserves also
fell in attempts to ward off speculative attacks. The short- term foreign funds started
pulling out sharply, causing reserves to fall further. When reserves fell to dangerously low
levels, or to levels that could not allow the meeting of foreign debt obligations, Thailand,
Indonesia and South Korea sought IMF help.


(c) Liberalisation and debt: the Malaysian case

Malaysia also went through a process of financial liberalization, with much greater
freedom for foreign funds to invest in the stock market, for conversion between foreign
and local currencies, and for exit of funds to abroad.

The Central Bank however retained a key control: private companies wanting to borrow
foreign-currency loans exceeding RM5 million must obtain the Bank's approval. This is
generally given only for investments that would generate sufficient foreign exchange
receipts to service the debts. Companies are also not allowed to raise external borrowing
to finance the purchase of properties in the country. (Bank Negara Annual Report 1997,
p53-54). Thus there was a policy of "limiting private sector external loans to corporations
and individuals with foreign exchange earnings" which according to Bank Negara "has
enabled Malaysia to meet its external obligations from export earnings." According to a
private-sector leader, this ruling saved Malaysia from the kind of excessive short-term
private-sector borrowing that led the other three countries into a debt crisis.

As a result of these controls, Malaysia's external debt has been kept to manageable levels.
Nevertheless the debt servicing burden in terms of local currency has been made heavier
by the sharp ringgit depreciation.

The relatively low debt level, especially short-term debt, is what distinguishes Malaysia
from the three countries that had to seek IMF help. The lesson is that it is prudent and
necessary to limit the degree of financial liberalization and to continue to limit the extent
of foreign debt, and moreover to, in the future, keep the foreign debt to an even much
lower level.

(d) Local Asset Boom and Bust, and Liquidity Squeeze

The large inflows of foreign funds, either as loans to the banking system and companies
directly, or as equity investment in the stock

markets, contributed to an asset price boom in property and stock markets in East Asian

With the depreciation of currencies, and expectations of a debt crisis, economic
slowdown or further depreciation, substantial foreign funds left suddenly as withdrawal
of loans and selling off of shares. Share prices fell. Thus the falls in currency and share
values fed each other.


With weakened demand and increasing over-supply of buildings and housing, the prices
of real estate also fell significantly.

For the countries afflicted with sharp currency depreciations and share market declines,
the problems involved:

** The much heavier debt servicing burden of local banks, companies and governments
that had taken loans in foreign currencies,

** The fall in the value of shares pledged as collateral for loans by companies and
individuals, and the fall in the values of land, buildings and other real estate property.
This has led to financial difficulties for the borrowers.

** The higher interest rates caused by liquidity squeeze and tight monetary policies have
caused added financial burdens on all firms as well as on consumers that borrowed;

** As companies and individuals face difficulties in servicing their loans, this has
increased the extent of non-performing loans and weakened the financial position of
banks, and

** Higher inflation caused by rising import prices resulting from currency depreciation.
Moreover, in order to reduce the current account deficit, or in following the orthodox
policies of the IMF, governments in the affected countries reduced their budget
expenditure. The main rationale was to induce a reduction in the current account deficit,
which had been targeted by currency speculators as a weak spot in the economy. Added
to the higher interest rate and the tightening of liquidity, this budget cut also added to
recessionary pressures.

(e) The fall in output

In the region, the financial crisis has been transformed to a full- blown recession in the
real economy of production.


Worst affected is Indonesia with a 6.2% fall in GDP in the first quarter 1998, and a
newly projected negative growth for 1998 of 15%, inflation of 80% and expected
unemployment of 17% or 15 million. South Korea's GDP fell 3.8% in the first quarter
1998. Thailand's 1998 GDP is expected to drop 4 to 5.5 percent in 1998. Hong Kong's
GDP fell 2% in the first quarter. Singapore enjoyed 5.6% growth in the first quarter but
is expected to slip into negative growth sometime in the second half of 1998. In Malaysia,
real GDP fell 1.8% in first- quarter 1998 (compared to 6.9% strong growth in 4th

A bright spot for the region is a turnaround in the current account of the balance of
payments. However this improvement came with a heavy price. The increased trade
surplus was caused more by a fall in imports than by a rise in exports, especially in real
(or volume) terms. Thus the trade surplus indicates the effects of recession on falling
imports, rather than an expansion of exports. Another point to note is that an
improvement in the current account need not necessarily mean a healthy overall balance
of payments position unless there is also a positive development in the capital account. A
possible weakness here could be an outflow of short- term funds, by either foreigners or
local people. To offset this, a repatriation of funds owned by local companies or people
back to the country should be encouraged.

(f) Easing of fiscal and monetary policy

Recently there has been an easing of fiscal and monetary policy in the affected countries
in response to the depth of the recessionary conditions. These actions would hopefully
have the effect of improving economic conditions and ease recessionary pressures.


As the East Asian crisis continues to deepen, the debate on the role of the International
Monetary Fund's policies has heated up. The IMF's top officials continue to defend their
macroeconomic approach of squeezing the domestic economies of their client countries
through high interest rates, tight monetary policies and cuts in the government budget.
Their argument is that this "pain" is needed to restore foreign investors' confidence, and
so strengthen the countries' currencies.


However, some economists had already warned at the start of the IMF "treatment" for
Thailand, Indonesia and South Korea that this set of policies is misplaced as it would
transform a financial problem that could be resolved through debt restructuring, into a
full- blown economic crisis.

The prediction has come true, with a vengeance. The three countries under the IMF's
direct tutelage have slided into deep recession. Partly due to spillover effects, other
countries such as Malaysia and Hongkong have also suffered negative growth in the
year's first quarter. Even Singapore is tottering on the brink of minus growth.

The three affected countries had faced initial problems resulting from currency
depreciation and stock market decline, such as debt repayment and a great financial
weakening of the corporate and banking sectors. But then came a second set of problems
resulting from the high interest rates and tight monetary and fiscal policies that the IMF
imposed or advised.

For companies already hit by the declines in the currency and share values, the interest
rate hike became a third burden that broke their backs.

But even worse, there are many thousands of firms (most of them small and medium
sized) that have now been affected in each country. Their owners and managers did not
make the mistake of borrowing from abroad (nor did they have the clout to do so). The
great majority of them are also not listed on the stock market.

So they cannot be blamed for having contributed to the crisis by imprudent foreign loans
or fiddling with inflated share values.

Yet these many thousands of companies are now hit by the sharp rise in interest rates, a
liquidity squeeze as financial institutions are tight-fisted with (or even halt) new loans,
and the slowdown in orders as the public sector cuts its spending.

In Thailand, "domestic interest rates as high as 18 percent have been blamed for starving
local businesses of cash and strangling economic growth," according to a Reuter report
of 3 June. In South Korea, thousands of small and medium companies have gone
bankrupt as a result of high interest rates. Although the country has about US$150 billion
in foreign debts, its companies in January also had double that (or more than US$300
billion) in domestic debt.


According to the Wall Street Journal (9 Feb), the Korean economy was facing fresh
agony over this huge domestic debt as thousands of companies file for bankruptcy as
they find it harder to get credit. "To blame for the tighter liquidity are higher interest
rates, a legacy of the IMF bailout that saved Korea's economy from collapse, and a sharp
economic slowdown." In Indonesia, whilst top corporations with foreign currency loans
have been hit hardest by the 80 percent drop of the rupiah vis-a-vis the US dollar, the
majority of local companies have been devastated by interest rates of up to 50 percent.
The rates were raised as part of an IMF agreement and were aimed at strengthening the
rupiah. However the rupiah has not improved from its extremely low levels, whilst many
indebted companies are unable to service their loans.

In Malaysia, which has fortunately not had to seek an IMF loan package, interest rates
were lower than the three IMF client countries. Nevertheless they also went up during
the first year of the Asian crisis. The interest rate hike and the reluctance of many banks
to provide new loans caused serious difficulties for many firms and consumers.
However, after the imposition of capital controls in September 1998, interest rates have
gone down significantly, by about four percentage points. This has eased the financial
position of debtors and banks. The capital controls were thus able to lay the condition
for enabling interest rates to go down without this affecting the exchange rate.

Without making use of capital controls, countries subjected to currency speculation face
a serious dilemma. They have been told by the IMF that lowering the interest rate might
cause the "market" to lose confidence and savers to lose incentive, and thus the country
risks capital flight and currency depreciation.

However, to maintain high interest rates or increase them further will cause companies to
go bankrupt, increase the non-performing loans of banks, weaken the banking system,
and dampen consumer demand. These, together with the reduction in government
spending, will plunge the economy into deeper and deeper recession. And that in turn
will anyway cause erosion of confidence in the currency and thus increase the risk of
capital flight and depreciation.

A higher interest rate regime, in other words, may not boost the currency's level but
could depress it further if it induces a deep and lengthy recession.


It is also pertinent to note that a country with a lower interest rate need not necessarily
suffer a sharper drop in currency level. Take the case of China. Since May 1996, it has cut
its interest rates four times and its one-year bank fixed deposit rate was 5.2 percent in
May (according to a Reuters report). But its currency, which is not freely traded due to
strict controls by the government, has not depreciated.

It has also been pointed out by UNCTAD's chief macroeconomist Yilmaz Akyuz that
"although Indonesia and Thailand have kept their interest rates higher than Malaysia,
they have experienced greater difficulties in their currency and stock markets." According
to Akyuz, there is not a strong case for a drastic reduction in domestic growth (as
advocated by the IMF) to bring about the adjustment needed in external payments.

Indeed it is very strange that the IMF as well as the leaders of Western countries are
shrilly criticising Japan for not doing more to reflate its ailing economy. They are calling
for more effective tax cuts so that Japanese consumers can spend more and thus kick the
economy into recovery.

The yen had been sharply dropping, causing grave concerns that this will trigger a deeper
Asian crisis or world recession.

Yet neither the IMF nor the Western leaders have asked Japan to increase its interest rate
(which at 0.5 per cent must be the lowest in the world) to defend the yen. Instead they
want Japan to take fiscal measures to expand the economy.

This tolerance of low interest rates in Japan as well as the pressure on the Japanese
government to pump up its economy is a very different approach than the high-interest
austerity-budget medicine prescribed for the other ailing East Asian countries.

Could it be that this display of double standards is because it is in the rich countries'
interests to prevent a Japanese slump that could spread to their shores, and so they insist
that Japan reflates its economy whilst keeping its interest rate at rock bottom? Whereas
in the case of the other East Asian countries, which owe a great deal to the Western
banks, the recovery and repayment of their foreign loans is the paramount interest?

In the latter case, a squeeze in the domestic economy would reduce imports, improve the
trade balance and result in a strong foreign exchange surplus, which can then be
channelled to repay the international banks.


This is in fact what is happening. The main bright spot for Thailand, South Korea,
Indonesia and Malaysia is that as recession hits their domestic economy, there has been a
contraction in imports resulting in large trade surpluses.

Unfortunately, this is being paid for through huge losses in domestic output and national
income, the decimation of many of the large, medium and small firms of these countries,
a dramatic increase in unemployment and poverty, and social dislocation or upheaval. A
price that is far too high to pay, and which in the opinion of many economists (including
some top establishment economists), is also unnecessary for the people of these
countries to pay.

They argue that instead of being forced to raise interest rates and cut government
expenditure, the countries should have been advised by the IMF to reflate their
economies through increased lower interest rates and increased government spending.

Recently the Financial Times (London) carried a strongly worded opinion article entitled
"Asian water torture" with this sub- heading: "Unless the IMF allows the region's
economies to reflate and lower interest rates, it will condemn them to a never-ending
spiral of recession and bankruptcy."

Written by Robert Wade, professor of political economy in Brown University (US), the
article notes that the IMF imposed very high interest rates on the basis that a sharp shock
rise in rates would stabilise currency markets, dampening pressures for competitive
devaluations and making it easier for client governments to repay foreign creditors. The
argument has a theoretical basis, says Wade, but it assumes conditions not present in
Asia. When financial inflows did not resume, the Fund's response was to give it more
time and make the pain sharper.

"Investors on the contrary took the high rates as a signal of great dangers ahead, making
them all the more anxious to get out and stay out," says Wade. "High rates and the
associated austerity policies have caused so much damage in the real economy as to
validate the perception of great dangers."

Wade blames the IMF for failing to grasp the implications of imposing high interest
charges on Asian companies that are typically far more indebted than western and Latin
American companies. "High rates push them much more quickly from illiquidity towards
insolvency, forcing them to cut back purchases, sell inventories, delay debt repayment
and fire workers.


Banks then accumulate a rising proportion of bad loans and refuse to make new ones.
The IMF's insistence that banks meet strict Basle capital adequacy standards only
compounds the collapse of credit. The combination of high interest rates and Basle
standards is the immediate cause of the wave of insolvency, unemployment and
contraction that continues to ricochet around the region and beyond. The uncertainty,
instability and risk of further devaluations keep capital from returning despite high real
interest rates."

Wade finds the IMF's contra dictionary approach "puzzling" as the United States
authorities after the 1987 stock market crash had acted to keep markets highly liquid
whatever the cost, yet in Asia the Fund acted to contract liquidity.

"Is this because it knows only one recipe? Or because it is more interested in
safeguarding the interests of foreign bank creditors than in avoiding collapse in Asia?"

Concluding that the IMF's approach is not working, Wade calls on governments in the
region to change tack away from the current approach of very low inflation, restrained
demand and high real interest rates as the top priorities. "They need to take a tougher
stance in the rescheduling negotiations with the creditor banks, lower interest rates to
near zero, and step on the monetary gas," he says.

This proposition might be found by many to be too bold. What if the markets react
negatively and the local currency drops further? To take this into account, Wade
complements his proposal with another: that the governments have to reintroduce some
form of cross-border capital controls. They should then channel credit into export
industries, generate an export boom, and let the ensuing profits reinforce inflationary
expectations and reflate domestic demand.

The West, meanwhile, should stop pushing developing countries to allow free inflow and
outflow of short-term finance as they are simply not robust enough to be exposed to the
shocks that unimpeded flows can bring. There should also be reconsideration of the
constitution of money funds (whose priorities are short- term results) and over-
guaranteed international banks, which lie at the heart of the problem of destabilizing
international financial flows.


"Until Asian governments lower interest rates, take control of short-term capital
movements, and cooperate within the region, the crisis will go on and on like water
torture. That will bring poverty and insecurity to hundreds of millions and turn parts of
Asia into a dependency of the IMF and the US, its number one shareholder."

The Wade article is the latest in a series of increasing academic articles calling for a
change in IMF policies.

The Harvard professor, Jeffrey Sachs, has been attacking the IMF ever since early
November 1997, when he predicted that the bailout packages for Thailand and
Indonesia, if tied to orthodox financial conditions like budget cuts and higher interest
rates, could "do more harm than good, transforming a currency crisis into a rip-roaring
economic downturn."

The predicted downturn has now turned out to be much worse than anyone imagined.

Another prominent critic is Martin Feldstein, economics professor at Harvard University,
president of the National Bureau of Economic Research and formerly chief economic
advisor to the US government.

In the "Foreign Affairs" journal (March/April 1998), he says the IMF's recent emphasis
on imposing major structural and institutional reforms, rather than focusing on balance-
of- payments adjustments, will have short-term and longer-term adverse consequences.

The main thrust of his article is that the IMF has strayed from its mandate of helping
countries resolve their balance of payments problems (which could be best done by
organizing debt rescheduling exercises between the countries and their foreign creditors)
and instead has been imposing conditions relating to their economic, financial and social
structures which are not relevant to resolving the debt and balance of payments
problems at hand.

This is a subject that needs separate treatment.

However, Feldstein also criticizes the IMF's short-term macroeconomic policies for
Korea, which calls for budget deficit reduction (by raising taxes and cutting government
spending) and a tighter monetary policy (higher interest rates and less credit availability),
which together depress growth and raise unemployment.


Asks Feldstein: "But why should Korea be required to raise taxes and cut spending to
lower its 1998 budget deficit when its national savings rate is already one of the highest in
the world, when its 1998 budget deficit will rise temporarily because of the policy-
induced recession, and when the combination of higher private savings and reduced
business investment are already freeing up the resources needed to raise exports and
shrink the current account deficit?"

Feldstein notes that under the IMF plan, the interest rate on won loans was 30 percent
whilst inflation was only 5 percent (at the time the article was written, earlier this year).

"Because of the high debt typical of most Korean companies, this enormously high real
interest rate of 25 percent puts all of them at risk of bankruptcy," he says.

"Why should Korea be forced to cause widespread bankruptcies by tightening credit
when inflation is very low, when the rollover of bank loans and the demand for the won
depend more on confidence than on Korean won interest rates, when the failures will
reduce the prospect of loan repayment, and when a further fall in the won is an
alternative to high interest rates as a way to attract won-denominated deposits?

"Although a falling won would increase the risk of bankruptcies among Korean
companies with large dollar debts, the overall damage would be less extensive than the
bankruptcies caused by very high won interest rates that would hurt every Korean
company. Finally, why should Korea create a credit crunch that will cause even more
corporate failures by enforcing the international capital standards for Korean banks when
the Japanese government has just announced that it will not enforce those rules for
Japanese banks in order to avoid a credit crunch in Japan?"

The questions raised by the IMF's policies, and now about the severe effects they are
having in the region, are very serious indeed, as they relate to the shape of the national
economies of East Asia and the very future of the countries.

Fortunately, Malaysia has not been forced by circumstances to seek an IMF rescue
package, and thus we have more degrees of freedom to determine short and longer term
policies to get out of the crisis.


For those countries already taking IMF loans, it is most difficult (if not almost
impossible) to make or modify policies or to change course if things go wrong, as the
IMF is always ready to threaten to stop its loans (which are given in small installments) if
these countries try to veer even a little from the IMF path.

Malaysia's policy makers have an unenviable task of going through the pros and cons of
each policy choice, for each policy option carries both advantages and disadvantages, and
thus there are many trade-offs to carefully consider.


The East Asian crisis has shown the threats of volatile and large short-term capital flows
to the economic stability of developing countries. What is urgently needed is greater
transparency of how the global financial players and markets operate, and reforms at
both international and national levels to regulate these speculative flows.

(a) Lack of Transparency

The workings and movements in the international financial markets and system have
played the most important part in the East Asian financial crisis. The crisis is also
manifesting now in Russia, South Africa and will likely spread to other countries.

It becomes obvious that this global system needs to be monitored and also reformed.
Yet there is a great lack of transparency in what constitutes the financial markets, who
the major players are, what are their decisions and how money is moved from market to
market, and with what effect.

Financial crises cannot be prevented or resolved unless this lack of transparency is
removed. That is a first step.

After greater transparency, there is the need to improve the system, to remove its worst
aspects and excesses, and to put in place a system in which currency and other financial
instruments (shares, bonds, etc) are used for legitimate trade or real- investment purposes
and not for non-beneficial speculative gain.


Transparency and reforms are needed in the following areas:

** We need to know who the major institutions and players are in the ownership of
financial assets, and their behaviour and operational methods, and the markets they
operate in.

How do they gain their leverage? From where do they get their funds and credit and on
what terms? How do they operate and through which channels? In particular, how do
they view emerging markets and what are their methods to derive maximum profits

These institutions include hedge funds, mutual funds, pension funds, investment banks,
insurance companies, commercial banks and the finance departments of multinational
and big companies.

** What is the system by which central banks of the major Northern countries regulate,
deregulate (or decide not to regulate) the behaviour of funds, speculators and investors?

How do central banks coordinate among themselves? Do they (or some of them)
coordinate among themselves to influence parameters such as exchange rates and interest
rates? What is the role (or lack of role) of the Bank for International Settlements?

** The IMF is the major international financial institution, whose policies can determine
the finances and fate of nations. There is lack of transparency on how the staff (who are
powerful in the institution) set their policies and conditions, globally and for each nation.

How do the staff determine the policy framework and the specific conditions for loans
for each client country? Do they come under the political influence of particular
countries (especially the US) and of the major shareholders, and thus lead to a situation
where decisions are not made only or mainly on professional grounds?

How do the major shareholders collaborate among themselves? What is the linkage of
interests between the IMF secretariat, the US Treasury and other major countries' finance
ministries, and the international banks (whose interests they usually serve in getting loans
repaid from developing countries)?


There are some studies relating to some of the questions above. However these studies
are few. Much more investigation has to be done, so that some basic knowledge of the
institutions and system can be gained. On that basis, proposals for changes and reforms
can be made.

(b) The Need for Reform

The present system suits the interests of financial owners and speculators. These players
have powerful backers in governments or in the U.S. Congress and other Parliaments in
the North. Thus getting global reform going is an uphill task.

Nevertheless it is becoming daily more evident that the present system is very unstable
and will continue to produce large-scale crises which is becoming too costly for the IMF
or the Group of 7 rich countries (G7) to bear. Therefore the question of "a new financial
architecture" is being raised by the G-7 themselves.

However the G-7 approach is to try as far as possible to have business as usual. This
means not reforming the present system of free and liberal flows of short-term or long-
term capital. They do not want regulation at global or national level.

Their approach is to get national governments in developing countries to strengthen their
banking systems so that the banks can withstand more shocks that volatile flows will
bring in future.

The G7 countries' focus is to have "greater transparency" at national level (so that
investors will not foolishly put money in weak spots) and tighter banking regulation so
that there will be less chance of a systemic bank collapse.

Such an approach may of course be useful in itself, as no one doubts the importance of
strengthening national policies and financial systems.

But surely this "national approach" in developing countries is grossly insufficient and
needs to be complemented by a global approach to monitor and regulate cross-border
financial flows. At the national level, governments should also be allowed and
encouraged to institute regulations to reduce the power of speculative funds (this needs
to be done especially in the rich countries) and to reduce the volatile inflows and
outflows of short-term capital.


There is a strong case (getting stronger by the day) for greater international and national
regulation of financial flows, players and markets, as well as reform of the IMF.

At the global level, there should be a system of monitoring short-term capital flows,
tracing the activities of the major players and institutions, so that the sources and
movements of speculative capital can be publicly made known.

There can be also be serious pursuit of a global tax on short-term financial flows, such as
the well-known Tobin Tax, where a 0.25% tax is imposed on all cross-country currency
transactions. This will penalise short-term speculators whilst it will have only a very small
effect on genuine traders and long-term investors. The advantage is that not only will
speculation be discouraged, but there can be far greater transparency in the markets as
movements of capital can be more easily traced.

At the national level, in the Northern countries, which are the major sources of
international capital flows and speculation, national regulations can be imposed to reduce
the power and leverage of funds.

For example, banking regulations can be introduced to limit the amount and scope of
credit to hedge funds. Proposals can be made for this and other similar objectives.

At the national level, in the South, countries should explore options of regulating and
discouraging inflows of short-term speculative capital. The well-known case of Chile
where 30% of all incoming foreign capital has to be deposited with the Central Bank
interest- free for up to one year, can be emulated by other countries.

This device was introduced after an episode of excessive inflows of funds. It has helped
to reduce short-term speculative inflows and outflows whilst at the same time it was not
a disincentive for the inflow of long-term foreign investment.

Another measure worth emulating is the requirement that local companies seek Central
Bank permission before securing foreign- currency loans, and permission should be
given only if or to the extent that the project being financed is shown to be able to yield
foreign exchange earnings sufficient to service the loan.


This is a requirement established by the Central Bank in Malaysia, and it helped to
prevent the country from having the large and excessive short-term foreign-exchange
private corporate loans that flooded other countries like Thailand, Indonesia and South

Further, countries that face a possible danger of sudden and large outflows of funds can
consider some limited restrictions (at least for a limited time when the danger is
imminent) on the freedom of residents and resident companies to transfer funds abroad.

Such limitations had in the past been in place in countries that now practice financial
liberalisation. Indeed restrictions on capital outflows still exist in many developing
countries (such as China and India) and have helped to stabilise their financial situation.

Whilst the desirability of regulations on inflows and outflows of short-term capital make
eminent sense, countries that have already liberalised and are dependent on the
"goodwill" of the financial markets are afraid that reintroducing them could generate a
backlash from the market and from the G7 countries.

Thus, it is crucial that the G7 countries themselves review their own anti-regulation
position, and give the stamp of approval and legitimacy for developing countries to have
these measures. Otherwise countries may not be able to institute measures that are good
or necessary for their financial stability and their economic recovery on the fear of being
labelled as "financial outcasts."

Once again, the ball is at the feet of the G7 countries to take the lead in both
international level and national level reforms.

Meanwhile Malaysia has broken the policy taboo by introducing capital controls and
fixing the local exchange rate to the dollar. Many other developing countries are watching
closely to see if this enables Malaysia to implement policies that lead to faster recovery. If
the Malaysian "experiment" works, this could lead to more countries taking the same



Whilst the debate on the causes and processes of the Asian crisis goes on, it is time to
draw at least some preliminary policy lessons. Developing countries should rethink the
benefits and risks of financial liberalisation. In particular, they have to take great care to
limit their external debt (especially short-term debt), improve the balance of payments
and build up their foreign reserves.

(a) Need for Great Caution About Financial Liberalisation and Globalisation

One of the great lessons of the Asian crisis is the critical importance for developing
countries to properly manage the interface between global developments and national
policies, especially in planning a nation's financial system and policy.

In a rapidly globalising world, developing countries face tremendous pressures (coming
from developed countries, international agencies and transnational companies) to totally
open up their economies.

In some cases and under certain conditions, liberalisation can play and has played a
positive role in development. However, the Asian crisis has shown that in other
circumstances, liberalisation can wreak havoc, especially on small and dependent

This is especially ture in the field of financial liberalisation, where the lifting of controls
over capital flows can lead to such alarming results as a country accumulating a mountain
of foreign debts within a few years, the sudden sharp depreciation of its currency, and a
stampede of foreign-owned and local-owned funds out of the country in a few months.

Surely then a clear conclusion from the Asian crisis is that it is prudent and necessary for
a developing country to have measures that reduce its exposure to the risks of
globalisation and thus place limits on its degree of financial liberalisation.

Countries should not open up and deregulate their external finances and foreign
exchange operations so rapidly when they are unprepared for the risks and negative
consequences. Measures should be adopted to prevent speculative inflows and outflows
of funds, and to prevent opportunities for speculation on their currencies.


At the least, the process of opening up to capital flows should be done at a very gradual
pace, in line with the growth of knowledge and capacity locally on how to adequately
handle the new processes and challenges that come with the different aspects of

This will require policy makers (including in the Central Bank, Finance Ministry,
Securities Commission and Planning Unit) to have the proper understanding of the
processes at work, the policy instruments to deal with them, adequate regulatory, policy
and legal frameworks and the enforcement capability.

Moreover, the private sector players (including banks and other financial institutions, and
private corporations) will also have to understand, master and control the processes such
as inflows of funds through loans and portfolio investment, the recycling of these to the
right sectors and institutions for efficient use, and the handling of risks of changes in
foreign currency rates.

The whole process of learning and training and putting the required infrastructure in
place will need a long period. Some European countries, which started with already
sophisticated financial systems, took more than a decade to prepare for liberalisation, and
yet failed to prevent financial failures.

(b) Manage External Debt Well and Avoid Large Debts

At the macro policy level, a very critical lesson from the Asia crisis is that governments
have to pay great attention to external debt management.

They have to take great care to limit the extent of their countries' foreign debt. It was the
rapid build-up of external debt that more than anything else led to the crisis in Thailand,
Indonesia and South Korea, and to a smaller extent, Malaysia.

Developing countries should not build up a large foreign debt (whether public or private
debt), even if they have relatively large export earnings.

The East Asian countries are big exporters, including of manufactured goods, and
perhaps this led them to the complacent belief that the export earnings would
comfortably provide the cover for a rapid build up of external debt. However, a bitter
lesson of the crisis is that high current export earnings alone are insufficient to guarantee
that debts can be serviced.


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