First of all I'm not a US citizen. But we live in a global economy and mistakes made by those thousands of kilometers away will eventually have an effect on me. Therefore it pays (both literally and figuratively) to pay attention.
Over the past weeks we've seen viral fear-mongering over the internet on how America should now be named USSA and her decisions are from the rich for the rich etc. etc (drama drama drama). Well that's all good. Freedom of speech and what not. But take it from someone 'actually' living in a country with a socialist agenda and a civil war; The roots of socialism often lies in the envy and hatred towards the rich. Enough about that. What I find funny is that none of those fear-mongers had a plan either. Their plan was just "no bailout", which eventually translates to "do nothing". Let them pay for their mistakes. But it's not that simple is it?
Let's imagine for a moment that the US government indeed opted to do nothing. It would have saved $700bn worth of hate for starters right? True. But in the long run the US economy would have entered recession and the economy would have further collapsed into a depression some economists predicted to be the greatest since The Great Depression of 1930s.
Remember there was a similar crisis in Asia around 1997-98? No? Let me give you a recap. I was doing my GCE A/Ls (high school) and a bunch of banks in and around south-east Asia started curling up and dieing. Sounds familiar? So Japan, through the Miyazawa Initiative and other similar schemes, spent around $80bn at the time to bail out affected economies as a short term measure. In the long term, financial sector reforms and watch-dogs were introduced to ensure a similar crisis will never happen or adequate alarms will be raised way before a crisis hits critical mass, should one occur.
The way I see it, the current situation is very similar to the Asian crisis in '97 and the bailout indeed is a good short term plan to prevent further collapse. However, the long term success of the bailout will heavily depend on what policy makers do from now on.
Over the past weeks we've seen viral fear-mongering over the internet on how America should now be named USSA and her decisions are from the rich for the rich etc. etc (drama drama drama). Well that's all good. Freedom of speech and what not. But take it from someone 'actually' living in a country with a socialist agenda and a civil war; The roots of socialism often lies in the envy and hatred towards the rich. Enough about that. What I find funny is that none of those fear-mongers had a plan either. Their plan was just "no bailout", which eventually translates to "do nothing". Let them pay for their mistakes. But it's not that simple is it?
Let's imagine for a moment that the US government indeed opted to do nothing. It would have saved $700bn worth of hate for starters right? True. But in the long run the US economy would have entered recession and the economy would have further collapsed into a depression some economists predicted to be the greatest since The Great Depression of 1930s.
Remember there was a similar crisis in Asia around 1997-98? No? Let me give you a recap. I was doing my GCE A/Ls (high school) and a bunch of banks in and around south-east Asia started curling up and dieing. Sounds familiar? So Japan, through the Miyazawa Initiative and other similar schemes, spent around $80bn at the time to bail out affected economies as a short term measure. In the long term, financial sector reforms and watch-dogs were introduced to ensure a similar crisis will never happen or adequate alarms will be raised way before a crisis hits critical mass, should one occur.
The way I see it, the current situation is very similar to the Asian crisis in '97 and the bailout indeed is a good short term plan to prevent further collapse. However, the long term success of the bailout will heavily depend on what policy makers do from now on.
- Safety nets should be put in place to ensure that financial institutions will never again get to gamble with other peoples money.
- Someone (by this I mean a regulatory authority) needs to keep track of the stability of the whole financial sector and the deals they make with each other and their customers (a revamp of consumer protection laws?).
- Inter institution borrowings and over optimistic and predatory lending practices should raise alarms as and when they are noted. Not when they develop into a Ponzi scheme and the whole piramid is on the verge of collapse.
