HONG KONG (Reuters) - It was fitting that Richard Duncan sequestered himself in Bangkok to write his latest book “The Corruption of Capitalism,” a post-mortem of the credit bubble that crippled the world’s financial system.

Duncan learned first hand from working in Thailand for most of the 1990s in the run-up to the Asian financial crisis that rapid credit growth causes excess capacity and leads to busts. Then governments have to finance rescue plans -- very similar to what is now taking place around the world.

After predicting in his 2003 book “The Dollar Crisis” that the U.S. property bubble would trigger a global recession, Duncan’s new book argues that governments will have to keep stimulating their economies because U.S. demand for cheap goods will not return to the halcyon days of the 2003 to 2007 boom.

Talk of an exit from the easy money policies in 2010 is entirely premature since investors will most likely see more U.S. stimulus spending next year to prop up demand.

“This current round of stimulus will begin to wear out and everything will start to weaken again, and that will require another round of stimulus, not just from the U.S. but from China as well,” Duncan told Reuters.

“If this stimulus is delayed or withdrawn, we will get significant drops in asset prices and go back into recession.”

Duncan is part of a group of economists like Marc Faber, Nouriel Roubini and James Grant, who believe the financial crisis is a symptom of something structurally wrong with the United States economy that will not be solved by the end of recession.

The institution of capitalism has been so corrupted by binges of borrowing financed with money printed on demand that governments now indefinitely have to take the reins of economies, Duncan argues in his book.

“We can’t describe this economic system as capitalism, I describe it as statism,” he said.

THINK AGAIN ABOUT CHINA’S PROSPECTS

For many investors, emerging markets such as China are the wave of the future.

However, Duncan, a partner at Blackhorse Asset Management, a hedge fund in Singapore, said investors were too optimistic about China, which he said is certainly headed for bubble trouble.

He is doubtful the fiscal stimulus and new loan growth amounting to about 40 percent of gross domestic product will lead to structural change in the export-dependent economy.

“That will just lead to more excess capacity with no one to sell it to, which means product prices will be extremely depressed, companies won’t profitable and banks won’t be repaid.”

The real antidote to the cycle of credit-fueled bubble and bust, in Duncan’s view, is for the U.S. government to spend an additional $3 trillion in the next 10 years to reindustrialize.

Stop making things that can be bought cheaply somewhere else and develop solar, biotechnology and nanotechnology products of the future. That will over the very long term shrink the U.S. trade deficit and provide sustainable growth, Duncan said.

Among his more austere prescriptions, Duncan would fix exchange rates, apply credit controls and only allow money supply to grow in line with population growth. He would also dissolve the Federal Reserve.

Duncan believes these radical steps are the only way to put the U.S. economy back on a path toward fiscal prudence and sound money, or what he calls economic orthodoxy.

“They are radical,” he said. “Radically orthodox.”