Newspaper article The Christian Science Monitor

Barings Failure Bares Isolationism's Flaws

Newspaper article The Christian Science Monitor

Barings Failure Bares Isolationism's Flaws

Article excerpt

THE American capital quivers to a drum-roll of small-town isolationism. This is crazy! The nations of the world are more closely tied, at more levels, than ever before. Americans need a government that can safeguard our interests at home and abroad as we navigate the challenging globalism of the years ahead.

To see the interconnectedness of today's world, just look at the way fallout from the collapse of Britain's Barings bank has helped unsettle our financial system.

Here are just a few of the "transnational" aspects of this tale:

* The youthful Nicholas Leeson, a Briton who worked for a Barings subsidiary in Singapore, bet on slender shifts in the financial markets in Japan and elsewhere in Asia. After Mr. Leeson's losses became unmanageable, he fled to Germany, where local police apprehended him only after receiving a tip-off from a French reporter in Brunei.

* Bonn then received at least one extradition request, from Singapore, and may yet be met with others. In London, the venerable Baring Brothers Bank was plunged into bankruptcy; its remnants are to be bought by a Dutch conglomerate.

* Financial markets in Osaka and Singapore experienced a swift initial downswing in response to the Barings collapse, but seemed to bounce back within days. Investors in Europe took a few days longer to be rendered risk-shy by the Leeson affair. They started to leave markets in countries viewed as less sound, like Spain and Portugal, to consolidate their investing in the seemingly safer home of the Deutsche mark. In the process, they dented the peseta and the escudo, and even helped to spark the run on the dollar.

So how many countries' economies have been affected? At least five or six, and counting.

Financial markets have always been to a certain extent transnational. But national barriers between the different markets have shrunk radically in recent years, and real-time communications have made all the major markets susceptible to one another's misfortunes. …

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