Not to steal the title from the famous work by Alexander Herzen, which, however, has very little to do with economics, but this is the question that seems to be most relevant recently in the lender-borrower relationships. Is it the investors' fault for putting money into risky projects and generating bubble economies, or is it the banks', who do not warn about the risk and care little about fund security?
Well, the wealthy Chinese investors seem to be putting the blame on the banks. While it is difficult to feel compassionate for those guys, at least they're breaking the trend of domestic investors doing nothing to protect themselves during crises while the foreign investors get away with their sins lightly. And though the issue is still up to some legal dispute (with the Chinese courts being of questionable democratic merit), the millionaire Chinese investors may well set an important precedent for the international financial community. If they effectively win this battle, not only will it encourage the major Chinese banks to adopt more cautious policies, but perhaps set a good example for other banks around the world. If not, the careless investment practices may continue to make future look grim, with yet another major financial crisis due to moral hazards by the time we get our PhDs (if Krugman's theory has some merit, that is).
Comment on: http://www.chinadaily.com.cn/metro/2009-10/27/content_8853939.htm
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