are good, and some of them are very bad. They are very powerful. For every dollar the hedge fund can have twelve times the leverage. Otherwise they can borrow again twelve times. Quantum funds, for instance, have $15 billion, but they can borrow again twelve times. So they can put the pound down, put the Mexican peso down, and put the buck down. So that is what we call the under-regulated funds.
To some extent, pension funds, which are the long term. The hedge funds are not that bad, for some aspects they are highly speculative so we need to monitor them and somehow set some regulations. The U.S. Congress investigated them in '94. They are very powerful.
｡?Makoto IOKIBE
Professor, Faculty of Law, Kobe University
Speaking of the experience of the Great Crash of 1929, Japan had the Hamaguchi Cabinet at that time, The Prime Minister Hamaguchi and the Finance Minister Inoue tried very hard to deal with the bad loans born by the bubble economy during the First World War. They seriously planed to implement an austerity program as a drastic reform bringing out into the open all the corruption and had the courage to carry it out.
At the same time, they aimed to restore the gold standard, now it is called globalization, and reforming Japanese economy into a self-standing one by connecting it to the global economy with the help of lifting gold embargo.
However the result was miserable. That was the case of implementing an austerity program for reform under the severe Great Depression. It was described in a newspaper caricature like this: Doctor Hamaguchi was asked, "Do you think the operation will be successful?" He answered with confidence "I'm sure it will be successful." Then asked again, "Anyway, do you think the patient will survive the operation?" "Well, that I don't know", he answered.
This turned to be the actual situation of Japanese economy where only one out of four or five graduates could get a job and girls were sold in farming villages. The Prime Minister Hamaguchi was finally shot by a terrorist and so was the Finance Minister Inoue. This is one of the teachings of history. If you bring out into the open all the corruption and reform the economy at the time of a turning point as the IMF does, it should be considered as the long-term project.
If you do so at the time when the patient is apt to develop pneumonia, he or she is likely to die.
Secondly, the Great Crash of 1929 gave us a lesson useful to the economic crises in the 1970s and these days. It is to work positively using the teachings of history. In the 1970s economic difficulties were overcome by enforcing the framework of international cooperation such as creating G7 Summit. This meant a lot for the global economy after the oil crisis. We should think about how Wall Street's stock fall caused the Great Depression staggering over 10 years.
Most conspicuously, each nation reacted impulsively to protect their own industries because they were not globalized as Dr. Yamano's Sanyo Electric, and feared cheaper foreign products that might ruin their industry. Then they raised import duties. Although it seemed reasonable to the country, it resulted in 10 years of world-wide frostbite or freezing to death since the whole international trade was numbed.
Therefore the lesson is not to implement it into the overall system, even though it is reasonable individually. In this regard I'm very concerned that Thailand and Malaysia are starting to impose import duties as Dr. Yamano told us. Now he fact that G7 nations would rather restrain the IMF, which seems to be the dominant system, shows the diversity of global reaction led by the Western nations. Under these circumstances there are relatively heal8ly movements that you are supporting with local acknowledgment and I appreciate it from a non-professional point of view. The point is to increase domestic demand, in other words, to import more rather than reducing the import of foreign products by imposing higher customs duties. This might bring some countries into debt temporally but it is necessary to warm up the overall global economy in an emergency. I think the lesson we need to learn is to cooperate with each other.
｡?Goenawan MOHAMAD
Director of ISAI, Institute for the Study of Free Flow of Information
I am not an economist, nor a historian. So I don't remember why and what kind of factors are forcing and encouraging Asian countries to globalize their financial market in the first place. Secondly, with George Soros, there are some worries about this under-regulated financial market in which he is the master. He once came up with some idea to sell out international credit insurance to both monitor and control the flow of the short time capital, What is your comment on that?
｡?SHINOHARA
Why we should globalize the market is a question that I didn't really think of. There will be many people outside the country who can participate in the market if it is globalized. Most of them live on Wall Street in the United States. Since they always seek a capital flow with high return and low risk,
