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Jakarta Post

Insight: Riding out economic storm

  • Gita Wirjawan

JAKARTA   /   Tue, January 27 2009   /  09:51 am

The theory of chaos in natural science explains how a butterfly beating its wings over the Amazon can lead to a hurricane in the Caribbean. Chaos theory is at work in the international economy today. The tangled web of complex financial products created to bankroll America’s housing boom has unleashed the worst financial crisis since the Great Depression. Major corporate failures have induced pressures powerful enough to bring down the US financial system and a painful global economic slump. Markets have entered a vicious cycle of asset deleveraging, price declines and investor redemptions. They have had a tempestuous effect, causing Alan Greenspan, the former chairman of the US Federal Reserve, to describe it as a “once-in-a-century credit tsunami”. Consider the effect it has had on the world’s largest economies. Volvo truck sales in the US in th...