David Eldon is still very much in the thick of things after retiring from the banking business three years ago. He is Chairman of the Dubai International Financial Centre Authority and an economic adviser to South Korean President Lee Myung-bak. Still based in Hong Kong, Mr Eldon recently sat down with Hong Kong Trader to share his views on the global financial turmoil.

What are your thoughts on US efforts so far to stem the financial crisis?

I am still not convinced that the US has come to grips with the realities of the situation – partly because something has been done in relation to the big financial institutions and Citi has been helped out, and partly because the headline news now focuses on the auto industry. But the US auto industry, per se, should not be rescued, in my view, but should be encouraged to rationalise. The airline industry, for example, was not bailed out. So what would be the rationale for doing so here?

Was the US$700 billion bailout package the right prescription?

Clearly something needed to happen to stabilise or at least calm the markets. But I'm not convinced that the bailout package was the solution, or the only solution. Other ways to address the problem could have come, for example, in the form of subsidising mortgage payments – options such as that. It would probably have been cheaper. Common sense needed to prevail. But until we have some positive confidence that the market is at or near the bottom – and stabilisation in the US housing market would be a decent benchmark – the market is going to remain jittery.

Is Asia going to be hit as hard as the rest of the world?

The Asian economies are generally not in bad shape. However, this American crisis has created a peculiar set of circumstances that have affected us psychologically and created a large amount of contagion. It's unfortunate because the fundamentals, by and large, are sound. Export-oriented Asian economies are starting to feel the effects. However, I still think that Asia is in better shape than the West, although some economies, such as Korea, Thailand and Indonesia, are under more strain than others. But places like Hong Kong are not so bad.

What do you think of China's response so far to the slowdown?

China is showing some leadership and responsibility in relation to the global economy, which it could so easily not have done – choosing to look after its own economy first. And we have to be honest: it has regularly been on the receiving end of critical comments from certain Western economies that have been found wanting. I believe that China is willing to play a part, but it wants a greater voice at the table. That sounds fair to me.

What about Hong Kong's response to the crisis?

Hong Kong authorities have generally been doing the right thing by instilling confidence in the financial market and pledging to maintain liquidity in the credit market. Hong Kong's economy is fundamentally sound, but people need to be persuaded this is not the end of the world.

What are the lessons to be learned here?

Understanding that markets are cyclical. Understanding what every family knows – you cannot spend more than you have, and you should not borrow more than you can pay back. This really is not the end of the world, although sadly, there are people who are very badly affected. During the Great Depression, people thought it was the end of the world. The same might be said of the two World Wars. The point is, yes, we're in a pretty bad cycle – we can't gloss over that. But over time, we'll come through it. Still, financial institutions could have used a bit more old-fashioned Scottish banking sense – prudence, and of having deep pockets and short arms.

David Eldon served as an honorary advisor to the Asian Financial Forum, which was held in Hong Kong, 19-20 January.