The United States Senate finally came to a controversial deal on Wednesday October 1, 2008 to “bail out” the struggling markets by injecting $US 700 billion into the economy. Though the bail-out bill still has to pass the lower House of Representatives on Friday, it is likely the bill will go through. If this does not pass, America and other Western countries may face economic catastrophe.
The failure of several US financial institutions on such a level does not happen overnight. Nor does it happen because speculators are forecasting massive hikes in oil and fuel prices. This kind of failure occurs because of misappropriation of funds on a very large scale: it takes pretending that the status quo still matters. It takes lending money to people who have no long-term income or collateral. It takes selling off mortgages to institutions already overburdened. It takes golden retirement parachutes of a ludicrous kind. It takes deception on a grand scale. And it takes time.
The world economy will face a very difficult recession in which a “credit crunch” situation will be the norm. What this means is that it will be arduous to obtain credit because the banks will no longer be lending money. Additionally, it means that a cash economy rules. If you have cash, you are king.
The question of who to blame has already been answered: Wall Street CEOs and the largest banks had way too much fun with other peoples’ money and then got their hands slapped with an enormous bail-out. However, one must go just that little bit further and question the hand-slapper: How do finance ministers and treasury secretaries fail to notice the blatant misuse of funds? The ideas and consequences of a recession are not new-the “R” word had been consistently used within the American media for months before the Northern Rock crisis hit the United Kingdom. In fact, when President Bush was last elected, hints of a recession were already in the works. Did anyone think that spending $80 billion for military campaigns in Iraq and Afghanistan would fill the coffers of the American Treasury? America’s entire economy, for the last several years, has been based on deceit. This is the status quo by which America has held steadfast; ” everything is working and it’s fine. Let’s continue to pick on Iraq.”
Mick Brooks got it right last week when he wrote that there are rules for the rich, by the rich. America has always held itself to a double standard: the wealthy can make the rules, bend the rules, break the rules, or ignore the rules. Everyone else is held to the legal standard by which America judges every one else – the rule of Law. It is an incredible hypocrisy to create the very criteria by which to judge others and not hold themselves to the same standards.
If this bail-out package fails to materialise, America – and other countries like Canada and the UK – will face the worst economic disaster in recent history. Markets and institutions worldwide are feeling the pinch and true to form, other people pay the price when America gets it wrong.
Categorised in: Article
This post was written by Safreena Rajan