Obama Rescue Plan: Wasted Opportunity?
The enormity of the global financial crisis, with its epicentre in the USA, has taken even the big economists and pundits by surprise. Now as the world waits with a bated breath, President Barack Obama's team has offered a rescue plan.
But what intrigues me most is that despite visible laxity in the regulatory mechanism and gross indiscipline (corruption) in the financial/insurance/banking sectors for full one decade or more, there is no one talking about accountability. Why?
Let me indulge in a bit of "I said so..." For a long time I had been warning about the dangerous consequences of this all, especially for the ordinary people. But I was branded as an "alarmist" and my arguments were brushed aside by implying that "I did not understand the mechanism of the free market".
For the ordinary people there is no immediate respite. In fact the "bail-outs" and "stimulus packages" amounting to billions of dollars/pounds/rupees/etc are being offered with no guarantee that the tax-payers funds would be carefully used by the very same financial/insurance/banking/etc sectors.
To put it more bluntly, there are no visible safeguards to prevent the misuse/squandering of such precious rescue funds. If these institutions could get away with murder earlier, what prevents them from doing so in the coming years?
President Barack Obama has no magic stick to rescue the USA, and the world, from this terrible financial mess. A sensible way out is a participative global emergency approach, instead of ad hoc measures in different countries.
We all know how fragile and dependent the world economic structure has become. For example, the US economy can easily be threatened by the sudden withdrawal of Chinese investments.
Whatever has been appearing in the Western media about this financial crisis appears more like a mumbo-jumbo of an amateur astrologer making all sorts of predicitons about the future.
In this grim scenario the best President Barack Obama can do is to call for an economic summit of world leaders.
While the list of jobless people is increasing at an alarming rate there is no sense of urgency among the world leaders to sit together and try to find short and long term solutions.
The Economist has an interesting take on this subject. "America cannot rescue the world economy alone...The fiscal stimulus plan has some obvious flaws. Too much of the boost to demand is backloaded to 2010 and beyond. And it contains 'Buy American' clauses that, even in their watered-down version, send the wrong signal to trading partners.
"Fiscal stimulus, indispensable as it is, cannot create a lasting economic recovery in a country with a broken financial system.
"The lesson of big banking busts, such as Japan’s in the 1990s, is that debt-laden balance-sheets must be restructured and troubled banks fixed before real recoveries can take off.
"History also suggests that countries which address their banking crises quickly and creatively (as Sweden did in the early 1990s) do better than those that dither.
"This is expensive and painful, but cautious, penny-pinching governments end up paying more than those that tread boldly.
"By any recent historical standards America’s banking bust is big (see article).
"The scale of troubled loans and the estimates of likely losses—which are now routinely put at over $2 trillion—suggest many of the country’s biggest banks may be insolvent.
"Their balance-sheets are clogged by hundreds of billions of dollars of 'toxic' assets—the illiquid, complex and hard-to-price detritus of the mortgage bust, as well as growing numbers of non-housing loans that are souring thanks to the failing economy..."
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In view of such challenges ahead, can the world leaders afford to sit in their individual ivory towers hoping that this crisis would just vanish in thin air?
Tags: USA , Global Finance , World Leaders , Barack Obama , Rescue Plan , Business , Finance , Banking , Economic Crisis , Jobs
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