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Another Asian Financial Bust?



Globalism changed the economic order of things.

Most relate globalism to free trade. However, the greater effects of globalism can come via the opening of capital flows among countries — both when capital surges in and when it surges out. This is now the case for a large number of developing countries.

You might ask why countries would be inclined to block foreign capital inflows given that they finance investment, pump up financial prices, and generate wealth. That was understood by most, except for a few socialist countries not wanting to be tainted by capitalism despite its benefits.

However, the bigger pre-globalism propensity was to restrain capital outflows. And ironically, without the ability to exit, few foreign investors were willing to enter with their capital in the first place. Globalism changed that by causing countries to relax constraints on capital outflows. Predictably, foreign investors themselves relaxed and enjoyed the greater returns available in faster growing, smaller economies.

So the elimination of capital outflow barriers increased the tendency of foreign investors to partake in offshore speculation, with the biggest beneficiaries being the developing countries.

Foreign capital freed these countries from dependence on local savings and local banks to finance investment. And when foreign capital flowed in, it financed investment in plant and equipment for manufacturing that was leveraging low-cost labor, especially China. Foreign capital also financed office developments, infrastructure, and residential condos making the skylines of places like Panama City look like this.

Foreign capital provides jobs and income, but it becomes problematic because it is seldom applied at a steady and measured pace in proportion to the opportunities. During the Great Recession, the Fed’s QE provided investors with a large liquidity pool disproportionate to the onshore investment opportunities, so a good deal of that liquidity gushed into off-shore investment.

And much of that went to the commodity and energy industries, which, at the time, were supply-constrained and expensive. These include Brazil, Indonesia, Russia, South Africa, Chile, and Peru among others, as well as some developed country plays in Australia, West Texas, and Canada.

In investment booms fed by outside (and not very discerning) capital, animal spirit-driven developers keep on borrowing and building to be absorbed by the market before their competitors, and the unrestrained booms that follow result in over-building, excess production, inventory build-ups and, in turn, soft prices, debt defaults, eventual bankruptcies, and penny stocks.

That much is true for any domestic boom and bust, but now there is a foreign twist when the projects are debt-financed from offshore sources that typically require repayment in US dollars.

Hence, foreign-financed investment has a built-in currency crisis in the making when settlement takes place because it drives the price of the US dollar upward and the local currency downward. Predictably, it comes at a time when the boom is over-built, leaving investors scrambling to generate revenue, and commodities continue to be sold at very low prices in order to cover the rising cost of dollar-debt repayment.

There is a rush to extinguish dollar debt before a property is lost to foreclosure, which, in turn, leads to major multiple market reactions – all downward. The selling of commodities at ultra-low prices creates an adverse currency movement for the affected country. For example, see the correlation (below) of the declining price of copper relative to Peru’s Sol and Iron Ore relative to the Australian Dollar.

This strong currency decline then causes unrelated companies, individuals, and even governments to sell most anything denominated in local currency and use the proceeds to purchase US dollar-denominated assets. The debt repayment wave deteriorates into a generalized capital flight and a currency collapse for the involved country.

Basically, the bright shining buildings shown above are still standing and shining, but in the economic and financial dimensions, all prices are falling down.

This is the basic scenario that followed the early days of globalism in which there was an over-build of manufacturing capability in the cheap labor countries of Asia in the 1990s. The consequence was a bust phase known as the Asian financial crisis that unfolded in 1997. The return of capital to the lender that spilled over to most emerging nations was therefore known as the “Asian contagion.”

What occurred were falling prices of everything: over-built goods, currencies, physical capital assets, as well as the financial claims to these assets.

This scenario is being repeated today in the great commodity boom of the last few years. Not only are the commodity prices falling but so, too, are the foreign currencies and foreign and domestic stocks and bonds that have financed the commodity boom. This also affects those financial entities that hold claims to commodity-related securities in their portfolios.

As a result, oil, coal, copper, and iron ore all are selling in the area of 70% less than when the facilities were built only two years ago. The price bust, the currency bust, the financial price bust, and the capital goods bust are in a grand, coordinated bust.

The bust phase includes China’s over-expanded manufacturing sector that gave rise to the commodity boom in the first place.

Meanwhile, the question becomes: Can the US economy continue to grow in the face of this?

There are adverse implications for US companies attempting to export goods (in the face of a relatively expensive dollar) to a developing world in recession. The foreign sales and earnings of these companies are being hurt, and that hurt is being registered in the US equity market. But meanwhile, American companies and consumers are benefiting from the cheaper import and energy cost savings. Indeed, the service sector is holding up the US economy.

When the dust settles, US companies will leverage the cheap prices of foreign-made goods and increase their profit margins. Indeed, Dell Computer back in the late 1990s became a break-out company that benefited enormously from the first Asian Contagion because it was outsourcing production to the countries whose currency was most affected.

Distressed prices of foreign currencies and assets will become a high return opportunity for the US dollar investor willing to patiently wait it out.

Subsequently, one must keep an eye on commodity inventories. When inventories start to work their way down, there is a bottoming-out of commodity prices, which, in this slow growth environment, could take some time. This will likely be measured in years, but no doubt its day will come.

The reversal of cheap currency in the EMs will set a bottom and bring capital back to those countries with a rush. At that time, all the prices that have fallen together will all rise in unison.

So it seems that two decades into globalism, we are finding that global capital flows — first gushing in and then gushing out of relatively smaller countries — add a new dimension of volatility to financial markets with a foreign currency twist. These are relatively long cycles, so investors must be patient. In the meantime, producers in developed countries will benefit from rising profit margins thanks to cheap foreign outsources.


About the Author

This article was written by Lew Spellman of Texas Enterprise. Lew is a Professor, Department of Finance of the McCombs School of Business, The University of Texas at Austin. Texas Enterprise is an organisation created to share the business and public policy knowledge created at The University of Texas at Austin with Texas and with the world. see more.


Women on Top in Tech – Dr. Sanna Gaspard, Founder and CEO of Rubitection



(Women on Top in Tech is a series about Women Founders, CEOs, and Leaders in technology. It aims to amplify and bring to the fore diversity in leadership in technology.)

Dr. Sanna Gaspard is the Founder and CEO of Rubitection, a medical device start-up developing a diagnostic tool for early stage pressure detection, assessment, and management. She is an Entrepreneur, inventor, and biomedical engineer with a passion for innovation, entrepreneurship, healthcare and medical devices. She has received recognition and awards including being selected as a finalist for the Cartier Women’s Initiative Awards(’13), a semi-finalist for the Big C competition (’14), a finalist for the Mass Challenge Business accelerator in Boston, and taking 1st place at the 3 Rivers Investment Venture Fair’s Technology showcase (‘11). Her vision is to make the Rubitect Assessment System the global standard solution for early bedsore detection and management.

What makes you do what you do? 
I am driven to have impact and improve healthcare as I have a strong drive to problem solve, comes up with new ideas, and see them come to life.

How did you rise in the industry you are in? 
I first focused on getting the educational background and then I pursued the goals I have for myself. I got my PhD in Biomedical Engineering with a specialization in medical device development. Having the educational background is important as a woman and minority to assist people in taking your seriously.  After completing my PhD, I focused on bringing my invention for a medical device for early bedsore detection and prevention called the Rubitect Assessment System to market to help save lives and improve care.

Why did you take on this role/start this startup especially since this is perhaps a stretch or challenge for you (or viewed as one since you are not the usual leadership demographics)?
I started my startup, Rubitection , because I felt it was the best way to bring the technology to market. I knew that if I did not try to commercialize the technology, it would not make it to the doctors and nurses. I also have confidence that I could manage developing the technology since I had taken classes on entrepreneurship and had my PhD in biomedical engineering with a specialization in medical devices.

Do you have a mentor that you look up to in your industries or did you look for one or how did that work? How did you make a match if you did, and how did you end up being mentored by him/her?
No, I don’t have a specific mentor in my field. I am looking for one at the moment. However, I do look up to Steve Jobs and Oprah as examples of how one can start with nothing and work their way up and build a successful, global, and reputable business and brand.

Now as a leader how do you spot, develop, keep, grow and support your talent?  
I first try to find people who have fundamental technical or work experience to be competent to complete the work. I then evaluate the person for intangible skills like independent thinking, reliability, leadership, resilience, organizational skills, strong work ethic, open mindedness/flexibility, and good communication skills.

Do you consciously or unconsciously support diversity and why? 
I consciously make an effort as a minority woman in tech, I intimately understand the need to promote diversity within my business and outside my business. I first hire the best people for the job and also make a point to hire women and minorities qualified for the position.

What is your take on what it takes to be a great leader in your industry and as a general rule of thumb?  
It takes resilience, vision, being a team player, an ability to inspire others and delegate work, knowing your weakness, and knowing when to put your business or yourself first.

Advice for others?
My advice to others is to take calculated risks, pursue every opportunity, surround yourself with supporters, build your team with smart dedicated people, and stay focused on your vision. I am striving to implement this advice myself as I work towards commercializing my technology for early bedsore detection, grow my team, and recruit clinical partners to address an $11 billion US healthcare problem which affects millions around the world.

If anyone is interested in learning more about our work or company, please contact us at [email protected].

To learn more about Dr. Sanna Gaspard, CEO of Rubitection visit:

If you’d like to get in touch with Dr. Sanna Gaspard, please feel free to reach out to her on LinkedIn:

To learn more about Rubitection, please click here.

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Women on Top in Tech – Suzanne Wisse-Huiskes, Founder of MatchBox Consultancy and an Advocate at the Global Tech Advocates Network



(Women on Top in Tech is a series about Women Founders, CEOs, and Leaders in technology. It aims to amplify and bring to the fore diversity in leadership in technology.)

Suzanne Wisse-Huiskes is a Strategic Consultant and Founder at MatchBox Consultancy with offices in the United Kingdom and Nigeria. MatchBox provides expert advise in Impact Investing, Alternative Finance, Venture Capital, Fundraising, Women Leadership, Business Development, and Economic Empowerment. She is also an Advocate at the Global Tech Advocates Network. Dedicated to challenging talented entrepreneurs, Suzanne is an official mentor at startup/accelerator programs in Africa, Europe, and Asia. She was awarded top 400 most successful women in the Netherlands for two years in a row.

What makes you do what you do?
My drive is to enable entrepreneurs to grow their businesses by improving their access to funding. This can elevate an entire community. I believe that Alternative Finance can potentially be a powerful catalyst for shifting the way our financial markets work.

I love the ingredients of the alternative finance market: the innovative nature of the industry; the global playing field; the turbo speed of change. The market is booming and shows little sign of slowing down.

I founded MatchBox to support highly motivated entrepreneurs and investors in their mission to create profitable businesses with impact. MatchBox has become a trusted partner to these clients: they value our strategic and operational expertise, as well as our strong global network used to consult and connect. The requests vary from developing large investing programs to ensure access to capital for SME’s, to developing funding strategies for entrepreneurs. What works in one country may not work in others. We understand the local players and the local markets. This work is fully aligned with what is important to me.

How did you rise in the industry you are in?
I’ve been in the crowdfunding industry since 2008. Back then, Facebook only had a 100 million active users as opposed to the 2.000 million users today. Kickstarter, one of the world’s largest funding platforms, was yet to launch. Joining the industry that early in the game, allowed me to rise with it. I was fortunate to be part of initiatives that pushed the Alternative Finance ecosystem, first in Amsterdam, then on a broader European level.

Then later on other emerging markets began to interest me. I moved to Nigeria, to work in Africa’s fastest growing economy and home to exciting trends in capital and fintech. I familiarized myself with the investing ecosystems in African countries. Today, I work in alternative finance ecosystems in Asia, Africa and Europe. Being able to learn, share and compare best practices from different economies to me is key in the rise of the industry. Currently, the crowdfunding market in Asia alone is worth over 200 billion Euros. That’s huge!

Why did you take on this role/start this startup especially since this is perhaps a stretch or challenge for you (or viewed as one since you are not the usual leadership demographics)?
I’ve always followed my heart in my professional life. I focus on work that I am passionate about and am not afraid to take the path less travelled. So leadership, demographics never held me back. With my experience and skills I am well positioned to successfully get the job done. For me it doesn’t feel like it’s a stretch.

Even more so, my clients see it as a big advantage to have women on the job. I recently worked on an impact investing program in West Africa focussing on women-led SME’s and experienced the benefits of a diverse team. Women entrepreneurs see the world through a different lens and, in turn, do things differently.

Do you have a mentor that you look up to in your industries or did you look for one or how did that work? How did you make a match if you did, and how did you end up being mentored by him/her?
The industry was completely new when I started, with no seniors to learn from. As a strong believer in mentorship, I do reach out to people in other industries for feedback and to bounce ideas.

I also learn a lot from working with various entrepreneurs. Collaborating with Sir Richard Branson in the beginning of my career was encouraging. We did a successful Crowdfunding Campaign for the elephants in Botswana. But I’m equally impressed by entrepreneurs that make a huge impact on their community no matter the circumstances. I’ve seen exceptional people grow businesses in the poorest regions of Nigeria. One can only admire their leadership.

Now as a leader how do you spot, develop, keep, grow and support your talent?
For me, mentoring young entrepreneurs is a great way to develop and grow talent. My focus is usually on two mentees at a time to ensure there is enough time to discuss ideas and challenges. I worked at fintech startups for almost 10 years before founding MatchBox. So there are plenty of stories to share and learn from, both on failures as well as on successes.

Do you consciously or unconsciously support diversity and why?
I’m very vocal on the need for diversity. I’ve always found myself in the male dominated groups. First at University, then in my first corporate position, and later as a Board Member. At some of my MBA Finance classes, I was the only woman in a room of 50 men. It never bothered or intimidated me. It just made me work a little harder.

Nonetheless, diversity is much needed. I strongly believe the industry is missing out on many brilliant women. That is why I dedicate a great deal of time mentoring female entrepreneurs. We discuss the tools their businesses require to grow and attract the right type of capital. Investors still have a different approach towards female founders. This year, we are launching an initiative called ‘the Republic of Female Founders’, to provide practical tools and guidelines that are specific for this group.

What is your take on what it takes to be a great leader in your industry and as a general rule of thumb?
My general rule of thumb: If you want to go fast, go alone. If you want to go far, go together. For me, it’s all about collaborative leadership. My industry is becoming increasingly complex, so sharing best practices will bring us far. That’s why I became an Advocate of the Tech Shanghai Advocates, part of the Global Tech Advocates. This group of senior leaders in the tech community is created to champion and accelerate the growth of the local technology sector.

I am also a fan of the CrowdfundingHub and Crowddialog in Europe, and Ingressive in Africa for similar reasons: Ordinary people doing extraordinary things because they believe in the positive impact of innovation in finance. My peers are all trailblazers in the alternative finance industry, I consider myself to be in great company.

Advice for others?
I strongly believe in collaboration, so building business relationships is key. I truly foster my relations. To me it doesn’t feel like work, but rather like building bonds. Seek opportunities to connect and reach out. It really pays off to have a strong network. At MatchBox, I work with a network of exceptional local experts. If you need advice and consulting on your funding strategy, impact investing program or crowdfunding strategy, we will gladly work with you. Contact us at MatchBox.

If you’d like to get in touch with Suzanne Wisse – Huiskes, please feel free to reach out to her on LinkedIn:

To learn more about MatchBox Consultancy, please click here.

To learn more about  Global Tech Advocates Network, please click here.

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