THERE is a strong need for a global economic alert system comprising eminent economists from the developed and developing nations and sanctioned by the United Nations to prevent a repeat of the train of events that led to the present international financial turmoil.

Such a system would enable the international community to be forewarned and to take appropriate action when certain economic and financial trends go haywire due to manipulations of the global economic order.

It is now accepted that it was the prohibitive price of crude oil that brought about recessionary effects in the West, especially the United States, and this exacerbated the sub-prime crisis which triggered the financial crisis the world is now reeling from.

The price of oil was artificially propped up by speculative traders wanting to make a fast buck, citing excess demand from India and China and other factors, such as natural disasters, a weak US dollar, unstable oil supplies from some countries, etc.

Hiking the oil price to ludicrous levels has brought about unemployment, retrenchment, loss of profit, and decreased investments, and triggered a general slowdown in many countries.

Now that the harmful effects of speculation and manipulation of the so-called free market are known, it is time the international community acted to avert future crises.

It is not the International Monetary Fund, the World Bank or the international trade system that are at fault, but the speculation both from the commodities and financial sectors.

Governments and international institutions have to now work on repairing the damage done by the speculators and manipulators by way of bailouts, write-offs and injection of vast sums of capital into the monetary system, to bring back the confidence of consumers and investors alike.

It is time the major economic players introduced a mechanism to stabilise the price of natural commodities, especially oil and manufactured products. The price of oil should be kept flexible to enable both importers and exporters to reap reasonable profits.

To do this, there should be a grouping of major oil importers, and this mechanism can bypass the speculators and ensure stable prices.

Determining the price of oil through production cuts or increases cannot do the trick, as the markets are now controlled by speculators and futures traders who have a vested interest.

It would be better if the Organisation of Petroleum Exporting Countries and major oil importers established a mechanism to determine a fair price.

Going through the current painful experience brought about by the financial turmoil, nations, cartels and speculators should be more willing to listen to warnings to control their actions which can be detrimental to the world.

V. THOMAS, Sungai Buloh, Selangor

Source: NST – December 31, 2008