The former British Prime Minister Gordon Brown warned that the next financial crisis could come from Asia. Should we listen to him?
Massive shadow bank lending to firms in Asian economies could be storing up the next global financial crisis, according to former Prime Minister Gordon Brown.
Brown was speaking at the Bank of England’s conference to mark 20 years of independence, a decision he himself took on becoming chancellor in 1997.
Knowledge of Asia
He is also known as the chancellor who sold more than half of the United Kingdom's gold reserves between 1999 and 2002 which proved to be deeply controversial.
He currently lives about 16 kilometers outside of Scotland's capital Edinburgh, and is no expert on Asia, but seems to believe he possesses a great understanding of Asian economic fundamentals.
Brute Force
In his speech Brown warned economists may not be able to work out the extent and direction of liabilities if a credit crunch begins in Asia because of the big problem of industrial and commercial lending in the the shadow banking sector.
«If that crisis emerged, would we really know who owed what to whom, and on what terms?» Brown asked. “Do we really have the global data now that allows us to make the judgement about stability across some of those markets?» he added.
While China might have the brute force to fight a crisis because of the size of its reserves, other nations would be more vulnerable, Brown warned.
