Bailout or Die out
Ismail Imadudeen
September 25, 2008
What is happening in America nowadays? Is it the beginning of an uncertain future, or is it the start of a new era? America needs a bailout plan? That´s indeed terrible in itself! What is really shocking is how easily and quickly the financial system of the biggest country in the world could come to the brinks!
The US government found itself in a situation where it must respond and seriously be involved in rescuing a freely operating financial might (market); the ´Wall Street.´ The Treasury is going to buy securities that nobody likes, or would dare to buy! The point here is that the Treasury might be able to sell them later with a price that could cover what was paid. The problem is that who is going to pay? The $700 billion plan will be paid by the American people; the tax payers. Whether the American tax payers like it or not, they have no other choice, as the only alternatives will be either to leave the situation like this, which will lead to countless bankruptcies and closures, or else enforce the US government to borrow huge amounts from abroad which will saddle the US on the decades to come!
What is happening in the US now had been experienced in many other parts in the world, with differing scales, from the beginning of the eighties of the 20th century. The problem here is that as the world is heading blindly towards globalization and free trade and open markets, things go out of control which would completely offset any gains from specialization and free trade. Globalization aims at abolishing all trade restrictions, for each and every country to just focus on the production of the goods that they are efficient in, and for national identities to be replaced by a global one (which necessitates global financial phenomenon). This rosy dream seems unworkable, as we can see now that specialization of the countries of the world will lead definitely to interdependency. That interdependency would make the whole process (global production and growth) idle if one country couldn´t do according to plans! So my point here is that should the world now search for some other theory of trade and commerce? Open markets seem dangerous, and government intervention appears now evident more than anytime before, especially in the capitalist world.
No one wishes America to go down, but this hard time must not go like that without learning a lesson or two from it. I think that the US government must undertake some new roles in the US economy that would enhance its existence as a partner, an overseer and a regulator of the financial market. The ´Fed,´ on the other hand, must organize and oversee the lending process; banks are required to have some self restrain when it comes to granting loans. Ethical issues must also be addressed here; I mean how if the financial institutions deal with the borrowers as partners rather than debtors? Finally, the whole world must address the issue of the movement of capital instruments between markets, not only to avoid potential global disasters, but equally to end the ever increasing problems of money laundry and terrorism.
The US government found itself in a situation where it must respond and seriously be involved in rescuing a freely operating financial might (market); the ´Wall Street.´ The Treasury is going to buy securities that nobody likes, or would dare to buy! The point here is that the Treasury might be able to sell them later with a price that could cover what was paid. The problem is that who is going to pay? The $700 billion plan will be paid by the American people; the tax payers. Whether the American tax payers like it or not, they have no other choice, as the only alternatives will be either to leave the situation like this, which will lead to countless bankruptcies and closures, or else enforce the US government to borrow huge amounts from abroad which will saddle the US on the decades to come!
What is happening in the US now had been experienced in many other parts in the world, with differing scales, from the beginning of the eighties of the 20th century. The problem here is that as the world is heading blindly towards globalization and free trade and open markets, things go out of control which would completely offset any gains from specialization and free trade. Globalization aims at abolishing all trade restrictions, for each and every country to just focus on the production of the goods that they are efficient in, and for national identities to be replaced by a global one (which necessitates global financial phenomenon). This rosy dream seems unworkable, as we can see now that specialization of the countries of the world will lead definitely to interdependency. That interdependency would make the whole process (global production and growth) idle if one country couldn´t do according to plans! So my point here is that should the world now search for some other theory of trade and commerce? Open markets seem dangerous, and government intervention appears now evident more than anytime before, especially in the capitalist world.
No one wishes America to go down, but this hard time must not go like that without learning a lesson or two from it. I think that the US government must undertake some new roles in the US economy that would enhance its existence as a partner, an overseer and a regulator of the financial market. The ´Fed,´ on the other hand, must organize and oversee the lending process; banks are required to have some self restrain when it comes to granting loans. Ethical issues must also be addressed here; I mean how if the financial institutions deal with the borrowers as partners rather than debtors? Finally, the whole world must address the issue of the movement of capital instruments between markets, not only to avoid potential global disasters, but equally to end the ever increasing problems of money laundry and terrorism.