The bailout saga
While the US is reeling under the pressure to rescue crumbling banks and lift up its financial institution with massive bailouts worth billions of dollars, it is still hard to digest how these unprecedented steps would restore its overall economy, ponders Meren Longkumer.business Updated: Sep 24, 2008 15:50 IST
While the US is reeling under the pressure to rescue crumbling banks and lift up its financial institution with massive bailouts worth billions of dollars, it is still hard to digest how these unprecedented steps would restore its overall economy.
Last few weeks we have witnessed a series of 'financial market earthquakes'. The shock collapse of one of the oldest and biggest brands, the Lehman Brothers, followed by the mammoth $85 billion bailout of AIG was extraordinary. The unfolding events as we witness with many crumbled institution like Fannie Mae, Freddie Mac, Merrill Lynch, AIG, and others are disheartening.
Has the open market failed?
Were the big names that fallen now, all made up stuff? Are the success of big capitalistic ventures now a thing of the past? Has capitalism failed? Will there be more regulatory regimes? Were the excessive bonus and perks availed by the top people let to its downfall? All these are question that needs to be answered in the coming months.
It is hard to imagine the Bush administration taking such measures of massive bailout of banks and injecting billions into the financial market-all using tax payers money. It would be harder to anticipate a quicker recovery from this chronic disease grown over the years with what President Bush declares as 'unprecedented' challenge. But the hardest irony here is a Republican President having to resort to intervene and regulate private ownership.
This globalised economy spares no country and what begun as US housing market and credit crunch has affected all other major markets around the world including India. So sensitively connected the markets are - the day the Lehman Brothers filed for bankruptcy, we've seen markets collapse in Europe and Asia by 3-6 per cent. It demanded pooling in funds from their respective countries to inject money into their markets to boost investor's confidence.
While economic pundits are hammering out long-term solutions that would help avoid the world collapse into deeper recession, we are witnessing the toll in our daily lives-inflation and rising interest rates.
The reality is grim and precarious. Though the spurt in oil price over the past one year is now seen to be normalising, it has already played its part by raking up inflation in many oil and energy hungry countries all over the world. We are faced with questions that would take not just human will to counter this latest crisis but also new evolving ideas that could help us address these tumultuous economic volcanoes: from housing, food crisis, energy demands, financial markets and other crucial sectors that stand as crucial pillars of a thriving economy.
While expedient measures are taken the events this month has once again drawn us with a challenge to look in and redraw lines in both micro and macro economic mechanisms.
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