Hello Everybody,
I'm back again with a bang...quite literally...today I have for you a posting quite different from the rest....in my previous postings we have had a potpourri of entertainment, news, happenings, recounting events from history, human life stories shared by some of you....but today I have the latest for you from the financial sector. For those of you who have been avoiding reading the pink papers lately may be caught unawares about the financial tsunami that has hit the global markets with the 'depression' sinking in the US economy (which economists say would be a tough recovery for the US)....what implications & repercussions it'd have on us is what Mr. Pannu discusses with us today in this week's post.
Did you find this posting informative? Was there anything you didn't know about that you have now come to know about....then don't forget to write in!! So, read on and share your views with us.
Love, Sonyaa
***************************
America is always in the news in and around the world whatever may be the subject! But what has happened over the last two weeks is something unbelievable even for American themselves the home of capitalism and laissez-faire state that demonstrated to the world the virtues of what free economy should be!!! Normally what happens to companies in the competitive world of business is best left to market forces, they may be sold, bought or even become bankrupt is something no body 
seems to loose sleep over. Just imagine over the last 6-7 years there have been over 600 odd bankruptcies consisting of small, big and few large ones like Enron the energy giant which became cropper I think over 5 years back. But nobody seemed to have ever noticed the writing on the wall and the party has been in full swing on the Wall Street till the sub-prime crisis a mountain of bad mortgages stormed the US markets early this year where the very foundation of the banking system was hit below the belt.
seems to loose sleep over. Just imagine over the last 6-7 years there have been over 600 odd bankruptcies consisting of small, big and few large ones like Enron the energy giant which became cropper I think over 5 years back. But nobody seemed to have ever noticed the writing on the wall and the party has been in full swing on the Wall Street till the sub-prime crisis a mountain of bad mortgages stormed the US markets early this year where the very foundation of the banking system was hit below the belt.
In fact from the early 2007 there have been clear signs that US economy was slowing down and it could slip into depression any time with fiscal deficits touching new highs in trillions of dollars and as a consequence the entire world would be in dire financial straits. But nobody seemed to care or take notice. So we have a financial crisis in hand which will make the great depression of 30s look like a small financial correction.
Guess what till recently was the best kept secrets on the Wall Street? It was that while the financial system was in turmoil but the stock and oil futures and commodity markets had been surging northward on a daily basis!!! No one would care to understand how this was possible. However, Federal Reserve with its vast statistical and allied information resources refused to see through this dressing up of balance sheets by big business with regulators sitting in trance as if nothing has happened and everything is business as usual. Even when the Federal Reserve knew that crisis was more serious with banking system on oxygen instead of applying drastic corrections just tinkered with interest rates coupled with doling out tax holidays to corporate America!!
Now just consider what happens to an average person on the street in such a fiscal scenario where there are definite signs of economic slow down in the world’s largest economy. This directly results in thousands of job losses leading to payment defaults on various loans by individuals on a huge scale be it housing, cars or many other loans for which one is expecting to fulfil through his job which is already lost! Thus financial turmoil by corporate America has directly put an average American on the mat from where he has not only lost his job but has no way to get back his financial sanity for a long time. Eventually when ordinary individuals in millions are affected by this financial turmoil, one is not surprised that now it is the turn of the banks to head for bankruptcies created by financial musketeers on the Wall Street who have been squandering bank funds in stock & commodity & oil futures markets.
Well the problem is much deeper than most people know but the ones who know also cannot take bold and unpopular economic decisions where people will be asked to tighten their belts. Most of the spending in the western world is always on credit and loans which take a lifetime to clear up and job loss on way creates a monumental problems for the individual but when you add up these individuals in millions with job losses leading to default in loan repayment we have a readymade bank crisis at hand. The results are for everyone to see which has brought about the fall of greatest American institutions like Bear Sterns, Citgroup, Fannie Mae, Feddie Mac, Lehman Brothers, Merill Lynch & AIG. The list does not end here many more have lined up for the dole. So much so that a 700 Billion bail out plan is being envisaged for the banking sector alone not to be left behind are the automobile and other sectors crying for similar relief from Federal Reserve.
That is a very sad commentary on the demise of the famous free economy which is using ordinary tax payers money to bail out crumbling private giants who till last month had market capitalization of trillions of dollars on the Wall Street!!! What a paradox for a laissez-faire state – The birth place of Capitalism where socialisation of losses and privatisation of profits is in progress on an unprecedented scale unequalled in the posterity of Adam!! Is it the beginning of American brand of socialism!!!
Guess what till recently was the best kept secrets on the Wall Street? It was that while the financial system was in turmoil but the stock and oil futures and commodity markets had been surging northward on a daily basis!!! No one would care to understand how this was possible. However, Federal Reserve with its vast statistical and allied information resources refused to see through this dressing up of balance sheets by big business with regulators sitting in trance as if nothing has happened and everything is business as usual. Even when the Federal Reserve knew that crisis was more serious with banking system on oxygen instead of applying drastic corrections just tinkered with interest rates coupled with doling out tax holidays to corporate America!!
Now just consider what happens to an average person on the street in such a fiscal scenario where there are definite signs of economic slow down in the world’s largest economy. This directly results in thousands of job losses leading to payment defaults on various loans by individuals on a huge scale be it housing, cars or many other loans for which one is expecting to fulfil through his job which is already lost! Thus financial turmoil by corporate America has directly put an average American on the mat from where he has not only lost his job but has no way to get back his financial sanity for a long time. Eventually when ordinary individuals in millions are affected by this financial turmoil, one is not surprised that now it is the turn of the banks to head for bankruptcies created by financial musketeers on the Wall Street who have been squandering bank funds in stock & commodity & oil futures markets.
Well the problem is much deeper than most people know but the ones who know also cannot take bold and unpopular economic decisions where people will be asked to tighten their belts. Most of the spending in the western world is always on credit and loans which take a lifetime to clear up and job loss on way creates a monumental problems for the individual but when you add up these individuals in millions with job losses leading to default in loan repayment we have a readymade bank crisis at hand. The results are for everyone to see which has brought about the fall of greatest American institutions like Bear Sterns, Citgroup, Fannie Mae, Feddie Mac, Lehman Brothers, Merill Lynch & AIG. The list does not end here many more have lined up for the dole. So much so that a 700 Billion bail out plan is being envisaged for the banking sector alone not to be left behind are the automobile and other sectors crying for similar relief from Federal Reserve.
That is a very sad commentary on the demise of the famous free economy which is using ordinary tax payers money to bail out crumbling private giants who till last month had market capitalization of trillions of dollars on the Wall Street!!! What a paradox for a laissez-faire state – The birth place of Capitalism where socialisation of losses and privatisation of profits is in progress on an unprecedented scale unequalled in the posterity of Adam!! Is it the beginning of American brand of socialism!!!
1 comment:
Lovely article....quite an eyeopener really...I dont read the pink papers....but the sheer simplicity of facts put together on the recession in US made it simpler for me to understand the global scenario in the financial sector
Post a Comment