Economies in Debt

I don’t know where this financial turmoil will take us to. Till now we were seeing that companies approaching their respective central banks to rescue them.

In India, RBI has decreased the CRR (the amount that has to be maintained by banks with RBI in cash) and a special window to infuse liquidity in system (Banks) and specially mutual funds which were facing redemption pressure.

And, In USA we saw Federal Bank after several rate cuts has proposed a mammoth USD 700 billion bailout package which will buy in the acid securities of the companies and will try to bail them out. Later in news we saw that they are rethinking on their packages. According to latest reports the Federal Reserve was actually looking to buy in stake in banks with some preferential status.

In Pakistan after they witnessed a sudden stock market crash they have ceased the bottom line of the stock prices for example: on a particular day the close price of the stock was noted and that price is made the base price for coming trading sessions. Now investors have to buy or trade same or above that level. The price cannot go below that range.

We saw Japan was facing a carry trade problem, Russia, Germany, France. Almost all countries are facing. This clearly suggests that we are in a coupled economies and many analyst are proven wrong who were claiming that, we still live in an economy which is self driven in nature.

The greatest minds of G20 countries are meeting to resolve this issue as fast as they can. Mr Bush Made a statement “One of the dangers during a crisis such as this is that people will start implementing protectionist policies” and he is pleased with the pace at which the leaders were addressing this issue.

Mr Brown of UK says “ It is up to us to build confidence in the world economy by taking all the actions that are necessary”

Now the situation is like that countries are approaching IMF for emergency loans to cope up with their funding needs a recent examples could be:

•  A USD 7.6 Billion rescue loan garneted by IMF to Pakistan

•  A USD 15.7 Billion loan to bolster Hungary’s finances.

•  A stand-by agreement with Ukraine worth USD 16.4 Billion.

My question rises again and again, why we have ignored the early signals of such disaster and covered it under the name of growth. Why we have not regulated the secondary markets which were trading at a level which actually was not supposed to happen.
Does this mean that we rather than going for an open market where forces decide the demand and supply to a regulated system. If you have the answer to this please do share it with me I will be more than happy to receive it.