December 18th, 2009 
admin 
It has been a year of crisis in USA riddled by foreclosures and unemployment. Among other things, the near zero rate of interest will not spare the rest of the world.
It is 15 months since Lehman Brothers collapsed. With the passage of time the question is being posed as to whether the financial crisis has blown over or if the second half of the real estate catastrophe has set in. The situation is odd. The financial markets have noted a record breaking year of gain after the government bailed out the financial entities with massive inflow of dollars from the tax payer’s kitty. The guarantees have been staggering with near zero rate of interest.
The USA dollar has depreciated. Carry-trade is generating bubbles in the market once again in the emerging zones. In the real sector industrial growth and GDP remains negative in the developed world but in China there is growth of more than 8%. The emerging markets are all indicating recovery. This has made some experts opine that the crisis has gone. Others nurse another view – the success of stemming the panic has brought down the political desire to reform the markets and rectify the economic structure across the globe.
Wall Street continues to party. Some bankers will get bonuses – even greater than what was pocketed during the peak year of 2007 but less than that of 2008 following the bailout by the federal government. A third opinion is that the zero interest rate will trigger off another bubbly situation.
This crisis has been something that has happened once in a century and it will remain the focus of talk and study for many years into the future. Many have been duped into thinking that the problem has been quickly resolved. The reality of the depth of the damage done will take time to sink in. The depression in the real sector is going to be much lengthier than had been apprehended.
Looking back there were two excesses. In the developed countries there was excess of financial manipulation generated by strategic leverage. It sprang from excess consumption that has now been linked undoubtedly with the problem of global warming. In 2008 central bankers became worried reacting to the price of oil touching $147 per barrel. They feared international inflation. But only three months after that the world collapsed into deflation. In the developing world there is excess of engineered goods because production had been targeting export figures.
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Tags: Usa Riddled, World