Doomsday forecaster sees systemic change opportunities in crisisNovember 17th, 2008 - 6:46 pm ICT by IANS
Dubai, Nov 17 (IANS) A new economic model comprising positive elements of capitalism and a banking system that is not self-seeking is what is needed to fight the current global financial crisis, according to Toby Birch, investment guru who had predicted the crisis a year back.Birch, who will be a keynote speaker at the 15th annual World Islamic Banking Conference in Bahrain Nov 23-25, said even in this time of crisis, opportunities for systemic change existed.
“It will be the dawn of a new and better structure for the global financial markets if we all join together against a common enemy - a decaying old system that has become increasingly impractical in these current times,” Birch said in an interview ahead of the conference.
Writing under the pseudonym Hugo Bouleau, Birch, in his book ‘The Final Crash: Addictive Debt and Deformation of the World Economy’, published over a year ago, had forecast severe problems for the global banking system.
The book, which had created a furore in financial circles, served as a warning to those who fell prey to the classic human conditioning that made one feel good times would never cease when, in fact, the opposite was about to happen.
In his interview to the Middle East Global Advisors (MEGA), a business information firm focused on the Islamic finance industry, Birch said drawing from historical experiences would be a good place to start for revamping the current system.
“We need an economic model that re-emphasises the positive elements of capitalism and a banking system that is symbiotic and not self-seeking,” he said.
According to Birch, the Islamic finance model also offered a viable alternative as mortgage holders here paid rent rather than interest and Islamic banks matched loans with deposits, charging fees rather than interest margin to pay for their services.
“The method may sound like semantics but there is a crucial difference: it avoids the creation of credit which is inflationary for the economy and ultimately self-destructive for the bank,” he said.
“In this form of finance there are no guarantees or deposit protection schemes but lending is far more responsible. Islamic banks are by default small, well capitalised and conservative.
“For many, a safe bank paying no interest may well be better than a bust one which offered 7 percent. To receive a return, savers may pool their money and participate in low risk schemes investing in communal projects,” he said.
He said though certain sectors of Islamic finance like property funds have also been affected by the current crisis, the system’s “joint ventures and private equity (without enormous leverage) also appeal with their partnership approach which shares risk and reward”.
In Bahrain, Birch will address over 1,000 delegates at what is Islamic finance’s biggest conference.
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Tags: finance model, financial circles, global financial crisis, global financial markets, investment guru, islamic banks, islamic finance, keynote speaker, mortgage holders, world islamic banking conference