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At the Epicenter: Where the Financial System Meets the Real Economy

Media Field Group

Cover Story Interview for International Finance Magazine on November 28, 2008.

Mr. Ron Nechemia is the Chairman of the Board of Directors for EurOrient Financial Group, a private sector global development financial institution that is accredited by the United Nations General Assembly on Financing for Development. In May 2008, Mr. Nechemia was interviewed by International Finance Magazine regarding his outlook for the global economy and the world’s financial systems. During this interview, he announced that he saw a systemic financial crisis brewing and warned that in the months to come the United States was likely to face a once-in-a-lifetime financial crisis, an oil shock, sharply declining consumer confidence and, ultimately, a deep recession. Mr. Nechemia’s forecast included a bleak sequence of events: Homeowners defaulting on mortgages, trillions of dollars of mortgage-backed securities unraveling worldwide and the global financial system shuddering to a halt. These developments, he foretold, could cripple or destroy hedge funds, investment banks and other major financial institutions like Fannie Mae and Freddie Mac. While some viewed his comments to be overly pessimistic at the time, Mr. Nechemia’s predictions proved accurate in less than half a year.

In fact, Mr. Nechemia has a strong record of correctly analyzing market data and predicting economic events. On November 5, 2007, in a special interview to Viet Nam Television, he warned that Viet Nam was likely to face economic deterioration and challenges to maintain control of the stock market in the face of the boom in share prices. He further posited that a sudden reversal and capital outflows would jolt the economy while the supply of securities has been increasing; demand has been even stronger, given limited outlets for savings. In this case, Mr. Nechemia’s predictions were also stunningly accurate and these events did occur six months later.

As we enter 2009, global financial institutions and markets have been badly shaken. Threats to systemic stability became manifest in September 2008 with the collapse or near-collapse of several key institutions. The far-reaching nature of the events that are unfolding is illustrated by the fact that within a period of only one week, large stand-alone investment banks disappeared from the U.S. financial landscape. It is against this challenging and still evolving backdrop that International Finance Magazine gave Mr. Nechemia a second interview to ask him his view on recent events in the financial systems and to suggest potential policy measures that could be helpful in the present global economic climate.

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Release Date: 
Wednesday, November 12, 2008
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