LB: Everybody
understands that the current financial crisis was manufactured, if
you like, in America. It originated in
America. There were many mistakes made in terms of
managing risk and regulation but what do you say to those who
believe that a part of the problem is the imbalance in the world
economy, with China’s $2 trillion of reserves?
WJ: I think
such a view is ridiculous. I think the reason for this
financial crisis is the imbalance of some economies
themselves. They have for a long time had double
deficits and they keep up a high level of consumption on the basis
of mass borrowing.
In those economies the financial institutions have not been put
under effective regulation and the financial institutions have
reaped massive profits with a very high leverage ratio.