Karan29: By the way dude - you had earlier stated that b-schools use essays to keep crap like me out...here are two of my 300-word essays for NUS (sorry, I know this doesn't relate to NTU)...yeah, read these over dude and see what a true idiot I am. I suggest you engage in more nuanced reading and analysis before you so sheepishly attack me bro...
B. Name one current issue (economic / social / political) that Asia is facing and identify a couple of strategies that you feel may adequately address the issue.
Asia has recently been afflicted by mercantilist expansionary monetary policies, which have caused intolerable food and energy price increases. Soaring inflation, India (9%), China (7%), Singapore (6%), Vietnam (23%), has also fueled real estate bubbles in Asian metropolises.
The undelying cause for asset bubbles and reduced income has been the systematic increase in the amount of local currencies created by Asian central banks in response to the inflationary measures instituted by Western nations subsequent to the global economic crisis. In light of US and Eurozone currency depreciation to reduce exorbitant sovereign debts, Asia reacted to support its exports by keeping their prices competitive.
To fight inflation, Asian governments have implemented tighter monetary policy. However, this has diminishedAsian entrepreneurs' access to capital and hindered regional productivity, innovation, and growth. Additionally, regional interest rate increases have been insufficient to offset the tremendous expansion of local currencies, which Asian governments have used to purchase nearly 40% of US Treasury debt.
As Western nations cannot pay back their debts, Asia should scrap these counterproductive lifelines that deprive it of precious capital that could foster more fruitful and sustainable Asia-centric global economic growth. An era of stagnation is engulfing Western economies and, accordingly, Asians must reorient their mindsets and restructure their industries to produce more goods and services for Asian consumers and the growing middle classes of Africa, Latin America, and the Middle East, where growth and demand remain strong.
Asians would benefit from the renewed purchasing power accruing from tighter monetary policies. This would encourage Western nations to redevelop their manufacturing sectors to satisfy rising Asian demand. The current situation of Asians subsidizing their richer Western customers is morally questionable and economically unsustainable. As Asian central banks stop inflating, the boom will end but Asia will surge forward on a more sound foundation.
C. "Rampant consumerism (seeking material goods without the ability to afford them) is one of the main causes for the current global economic crisis. Restraining consumerism remains a key task for developed countries like the US and Western Europe." What are your views?
Rampant consumerism was only a minor contributory sociological factor to the current global economic crisis. Restraining it is not a key task for developed Western nations because the wealth reduction, economic insecurity, and austerity associated with the crisis have naturally reduced Western consumption.
The primary cause for the onset of the crisis was actually the artificially low interest rates maintained by the U.S. Federal Reserve to counter the recessionary effects of the "dot com" technology bubble and the "9-11" terrorist attacks. Low rates promoted an expansion of the money supply, which coalesced into a real estate bubble. The result was a mortgage default crisis in the U.S. and Europe.
This bubble was indirectly promoted by bank deregulation, including the repeal of the Glass-Steagall Act, by the U.S. Congress. Additionally, it was abetted by poor decision-making, lack of risk management, and outright fraud by Western banks. As big banks expected to receive sovereign bailouts if trouble arose, tremendous moral hazard pervaded their pre-crisis activities.
The securitization and sale of worthless financial assets, tied to unviable mortgages and overvalued real estate, to global retail and institutional investors fueled the bubble's massive international growth. The financially-engineered nature and high-frequency computerized trading of increasingly complex derivative products further exacerbated the problem.
Artificially cheap mortgage rates led to a misallocation of capital into construction activities and excessive property development. Personal savings and investment capital were eventually lost in these sectors while other industries underperformed due to reduced capital investment.
While Westerners (and even Asians) certainly purchased too many Rolexes and Maseratis, the roots of the current crisis are not specifically attributable to conspicuous consumption but to mal-investment arising from misguided U.S. policies to manipulate interest rates in an attempt to stimulate economic growth, despite the foreseeable and detrimental side effects that now engulf the world.
