Sir: George Soros and others are quite wrong to blame financial markets for the global economic crisis that erupted in Asia ("Is capitalism heading for breakdown?", 2 December). The root causes of these problems were all political; the financial markets were merely the bearers of the bad news.
The basic problem was and remains heavy government intervention in the banking markets of those countries.
Financial regulation initially forced a lot of money into highly suspect but politically favoured schemes. When the loans went sour, more financial regulation and politically-controlled central banks sent ever-increasing amounts of new, good money after the growing pile of old, bad money.
A political lender of last resort can successfully put off a small, short- term crisis, but only by risking a bigger crisis later. Eventually the crunch will come.
The situation now is that no one wants to lend more money into a system that still refuses to write off its debts, is still sending good money after bad, and is therefore unable to repay new loans.
The politically-created bad loans are now so big even their governments cannot bail them out.
This is why Asian markets and currencies have collapsed. It is not a market failure, it is a political failure; Asia will not recover until its financial markets are deregulated.
M NISBET
Brentwood, Essex
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