South Asia Investor Review

In yet another act of conciliation on the part of Western religions towards Islam, the Vatican newspaper Osservatore Romano has voiced its approval of Islamic finance. The Vatican paper wrote that banks should look at the rules of Islamic finance to restore confidence amongst their clients at a time of global economic crisis . “The ethical principles on which Islamic finance is based may bring banks closer to their clients and to the true spirit which should mark every financial service,” the Osservatore Romano said. “Western banks could use tools such as the Islamic bonds , known as sukuk, as collateral”. Sukuk may be used to fund the “‘car industry or the next Olympic Games in London,” the article says. The Vatican article is only one of many articles that have recently appeared on the acceptance by Western governments and bankers of an Islamic financing system . More than accepting it, they seem to be welcoming it, though they are certainly being pressured into this by unnamed force...

As the modern system of capitalism faces the most serious challenge of its existence since Adam Smith , the name of John Maynard Keynes (1883-1946) is being regularly invoked by economists, politicians, bankers, and the media. And with good reason. Born in Cambridge, England, in 1883, the year Karl Marx died, Keynes probably saved capitalism from itself and kept Communists at bay. Keynesian Economics advocates the use of government monetary and fiscal policy to maintain full employment with low inflation. Keynes described Capitalism in the following words: "Capitalism is the astounding belief that the most wickedest of men will do the most wickedest of things for the greatest good of everyone." A well-known anti-Semite , Keynes once said, "It is not agreeable to see civilization so under the ugly thumbs of its impure Jews who have all the money and the power and brains ." As in the past financial crises, powerful Jews on Wall Street and in Washington are being ...

The Bush administration has been the target of attacks by Democrats for the international financial crisis that began on Wall street earlier this year. The critics' main argument is that the Bush-era anti-regulation environment allowed unregulated derivatives contracts, called " weapons of mass destruction " by Warren Buffett, to grow into a mushroom cloud. While it is true that the dramatic growth of derivative contracts such as credit default swaps happened on Republicans' watch, the fact is that the seeds of the current crisis were sown during Clinton years. It all began with an obscure but critical piece of federal legislation called the Commodity Futures Modernization Act of 2000. And the bill was a big favorite of the financial industry it would eventually help destroy. It not only removed derivatives and credit default swaps from the purview of federal oversight (on page 262 of the legislation), Congress prohibited the state and local governments from enforci...

The International Monetary Fund has come under severe criticism as the financial crisis that started on Wall Street is spreading to the developing world. IMF is the most important multi-lateral financial institution. It is responsible for overseeing the global financial system and the economic policies of its 185 members. The IMF is supposed to act as an early warning system for markets and economies. The institution is also charged with diagnosing economic problems and proactively regulating and stabilizing the international financial system to prevent and manage the kind of financial crisis the world is facing now. Pakistan's former Prime Minister Shaukat Aziz , credited with reviving Pakistan's economy, is taking the IMF to task for being absent, or at least tardy. Mr. Aziz accused the International Monetary Fund last week of failing to show leadership during what he described as a "historic" global financial crisis. As world leaders met to shore up distressed fin...

The high-profile role played by Jews on Wall Street has never been a secret. Many of the wheelers and dealers responsible for shaping the current US financial system are Jewish, including former AIG CEO Hank Greenberg, former Citcigroup CEO Sandy Weill, recently-retired Lehman Bros. CEO Richard Fuld, former Fed chairman Alan Greenspan, former Treasury Secretary Bob Rubin, current Fed chairman Ben Bernanke,etc. One of the " weapons of mass destruction " described by the legendary investor Warren Buffet is the Credit Default Swap . Greenberg's AIG is the biggest purveyor of CDS. In spite of the warnings by Buffet in 2006, Greenspan and his successor Bernanke argued against regulating derivatives such as credit default swaps. Unregulated financial derivatives are now considered the biggest cause of the financial collapse. Credit derivatives is one of the most successful innovations of financial engineering over the last ten years. The current active credit derivatives mark...

Amidst a flurry of activity by Pakistani government to seek bailout from friendly nations and possible resort to IMF loans, the credit markets are betting that Pakistan will most likely default on its sovereign debt. Pakistan's sovereign debt now has the dubious distinction of being the riskiest, surpassing Argentina's sovereign debt. According to The News , the price for insuring $10 million worth of Argentina's debt in September stood at $788,000 while the price to insure the Government of Pakistan-guaranteed debt skyrocketed to $950,000, something that has never happened before. As recently as June this year, Pakistan sovereign debt credit default swaps (CDS) traded at 530 basis points in Hong Kong, meaning it cost $530,000 a year to protect $10 million of Pakistan's debt from default for five years. A jump from 530 to 950 basis points means the risk of default by Pakistan has almost doubled since June, 2008. The risk has particularly shot up since President Mushar...