Aided by major advances in Information Technology,the GDP’s of the United States and other countries has risen dramatically during the 1990’s and into the current century. Economic and financial advances and declines are of course cyclical yet few experts or analysts in the global market place anticipated the rapid financial meltdowns we have witnessed in recent weeks and months, the steepest decline since 1929.
This unfortunate and however remarkable incident has proved the need of redefining and re-strengthening the current financial chemistry. For instance the biggest bail out package, cuts in CRR up to 150 bps have proved itself insufficient to prevent the steep fall in stock indexes across different global exchanges.
It seems strange that the collapse of several major financial institutions such as Lehman Brothers came as such a surprise. Hindsite shows that there were plenty of danger signals which if heeded may have prevented this major problem. The business model of Lehman Brothers, their lending practices, and their operating practices, if attended to and revised at an earlier time may have saved the company and kept employees and shareholders holding a bag containing precious little.
The question has to be asked as to what if anything financial institutions have learned from this experience. Will they accept the bailout packages and continue with business as usual or will they use this financial assistance to buy time enough to redefine and retool their business models? This would seem imperative if we are to experience solid and sustainable economic growth once again.
The US and China have been working together to attempt to get tings turned around with perhaps some success. However, even if these to major economic powers experience some success in achieving a recovery, the other Asian and the European countries have to be fully involved in the process.
The practice of instituting financial rescue or bailout packages begs the question as to how long and at what cost will financial institutions and economies be able to withstand the pressure leading to future debacles. While the financial situation is under repair the investor has to review is or her own patterns of investment to determine how, from this time forward, to gain a sustainable growth rate.
Instead of finding out all these hook and crook at the time of turmoil political leaders of prosperous and responsible nations should sit together to decide strategies, which can prevent such collapses in future. IF incase these solutions doesn’t crop up from them then small investors should be careful while making any decision in putting their money in.
We may feel sometimes that a plunge in the stock market affects only the major stockholders, the “big boys”. It is not always apparent that a decline in the stock market means that companies issuing stock suddenly find themselves with insufficient capital to meet their goals. The results can mean decreased production, lower wages, and lost jobs. Eventually these negatives can and will affect the average citizen. As a part of any recovery package the average citizen needs to be educated as to what the big picture means to him or her.
Viewed 47 times by 21 viewers
