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Old Tuesday, March 10, 2009
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Default Financial melt down what i comprehend

Financial meltdown
The current melt down is now an indubitable reality .No one can refute it. It was not long before but rather most recently when economists were claiming that they have discovered an elixir for economy. The trade cycle enigma is solved and now the world shall not face involuntary unemployment ridiculing classical economists like Says and Pigou
Another 1929 were considered out of the context and out of the question.
But now, we are faced with another great depression.
This crisis started from the collapse of real state and stock market bubble has now spread to manufacturing sector as well resulting in virtual paralysis of economy and loss of millions of job. For the first time frictional unemployment in USA only is touching the double-digit mark, since 1929.
Lehman brother former chief executive Richard Fild told the USA congress in a briefing enlightening them about this quagmire. He commented

My bank has fallen victim to a tempest of fear.

This meltdown has now entangled not only the stock markets but currently even the very existence of countries is at stake.
It was believed that Asian purchasing power is a way out to this muddle but at this moment Asian markets are also entwined in this mess.
There are huge crashes in respective stock markets all over the world.
This is another once in a century depression and it is too preceded by unwarranted speculation. American stock market soared from a capital of 5.4 trillion dollar to 17.7 trillion dollar in 1999 and then reached an unbelievable 35 trillion dollar in 2007. The equity share on the world economy has, at the present, reached a horrendous 500 trillion dollar that is ten times the world GNP.
Warren Buffet is rightly saying
Economy has fallen through a Cliff (Into the abysmal deepness of Hell, I am sure. End of capitalism once and for all)
Bankers and capitalist (Just like Pakistan) were accruing huge returns in the time of the economic harvest in the so-called economic boom. The whole situation is unfathomed, even in the light of rent theory of profit or if one is a strong advocate of risk bearing theory. You can take marginal productivity, dynamic theory, wage theory or uncertainty-bearing theory blah blah but No body can defend the amorality of modern shylocks- Their gross negligence for even the corporate ethics. There was massive fudging in balance sheets in almost all the big corporations to hoodwink stockholders
The corporate governance was a group of vultures that thrive upon the retirement plan of common man. All they care about was their big bonuses and lucrative remuneration packages which according to them, a reward of their risk management capabilities
The collapse of free market was writing on the wall in 2006 when Greenspan plan of reducing discount rates, a tool of his monetary measure to stimulate economy was installed
This result in record inflation, rise in food and oil prices, clearly a over speculation in these areas. The oil was never in dearth as it is evinced after the unfolding of the crisis when even a forty percent reduction in oil supply failed to generate demand .The seven sister oil giants are now facing the challenge of keeping up the big profits they had in the artificial boom

The situation is much more serious and complex even to 1929 situation. These modern shylocks have created an economy of 50 trillion dollars, which has an equity burden of 500 trillion dollar. An overestimated economy, which has far stretched beyond its means, is depending upon the consumer ability to spend lavishly and imprudently.

The propensity to spend will be marginal and thus even the lavishly spending consumer market of USA and EU will be facing deflation.

The need of the hour is to find new exchange of medium- to have a stringent control on free market-To have legislation and executive control on corporate governance and to get rid of big bonuses and incredible salary packages of top executives.
The gulf countries are now in danger of facing the economic meltdown similar to what France faced before the Second World War. They will be facing severe budget restraints and a lack of interest and slow down of the development of their real state because of slashing of oil prices. They are needed to find new economic partners and to terminate their reliance on banking sectors of EU and USA.
The world governments are faced with a quandary of taking extreme measures to cope with this problem. Obama administration has vowed for nearly 900 trillion dollars to stimulate the economy to generate aggregate demand equivalent for nearly a 3000-dollar share, encumbered by every American whether adult or an infant.
It is argued that if you are an inveterate gambler you go for jail for your amorality but if you are a rich banker, like an executive of AIG , you will be provided with a unimaginable remuneration package and will be benefited for the most lucrative retirement package as a salute of your risk management capacities and an icing on the cake you will be entrusted with billions of dollar more to be squandered once again, collected from the pockets of the common man just like how sheriff on Nothingam did in Robin Hood. Timothy Franz Geithner is indeed the ideal actor to play the sheif of nothingam
This tempest has reached Pakistan too.
Qaiser bangali today has warned that the effects of this great depression are now seen in Pakistan culminating the aggregate demand. We are at present should be prudent enough to get rid of the over expenditure and should be focused on increasing our revenue.
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Old Tuesday, March 10, 2009
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Medal of Appreciation: Awarded to appreciate member's contribution on forum. (Academic and professional achievements do not make you eligible for this medal) - Issue reason: CSP Medal: Awarded to those Members of the forum who are serving CSP Officers - Issue reason: CE 2008 - 13th in Sindh Urban
 
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Default References

www.guardian.co.uk “Global recession - where did all the money go?“ 2009-01-29



It's official: Recession since Dec. '07
The National Bureau of Economic Research


The global housing boom
Jun 16th 2005
From The Economist print edition


Times The new NEW-DEAL
Various article published from july 2008 till date

Fareed zakarya
Global financial melt down Rise of the Rest

Daily The News statement given by Qauser Bangali on 9th march 2009
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