The economic crisis is in full swing

Uncertainty fell on most stock brokers’ faces, as all the major global stock exchanges such as the New York’s and London’s went into a tailspin. Not even our regional stock exchanges, such as the Nairobi’s, were spared. I can only imagine the faces of shareholders, who having banked their future on their shares, found them not worth the paper they were printed on. The world’s economic giants are flooding historic monetary bailouts to their troubled financial institutions –and as of recent, President Obama has pumped $800b in the economic recovery package. While we are daily coming to learn fancy financial vocabulary (hedge funds, sub-prime mortgage crisis all over the news, appear words on our TV’s and newspapers characterising the crisis as a “global meltdowns”, a “global economic downturn spirals”. As a result of this panic people are moving around with placards blazed with the words ‘regulation needed’. I feel deregulation should continue while more transparency and confidence in our financial institutions is needed. Look at history and statistics; since the beginning of the deregulation process in the 80’s there has been a quadrupling of economic activity and all this was due to deregulation. Regulation is a form of ‘car brakes’ to the economic ‘vehicle’ that puts the whole economic process in slow motion. In the first place, why talk of risk if transparency is shown? This puts the entire blame, unjustly I believe, on greedy bankers. I think bankers were so taken up by the financial gold rush that they were unable to foresee any downturn. Look at former Federal Reserve Chairman, Alan Greenspan’s reaction when the crisis became global in September 2007. He never in his dreams thought such a crisis was possible. Part of the crisis was caused by previous over-speculation- this has ended up causing loss of confidence in the stock market. When investors see major stocks such as Dow Jones Industrial, S&P 500, FTSE 100 all close everyday 3% or 4% lower, they have no option but to get scared and withhold. Disappointing financial news day after day is thrown into the mix (of recent AIG’s corporate record history loss of $ 61.7 billion coming the same week Royal Bank of Scotland made a huge loss in billions of pounds). Economists at major institutions and banks don’t know where the slump will reach since their predictions were all wrong. Take for example European Central Bank Governor Jean-Claude Trichet’s press comment in August 2008; he predicted after two or three quarters there would be some positive changes but we are now in March 2009, and it’s even worse now. Most economists predict that it will be around mid 2010 when an upturn might occur. Breaking news flashing around our screens is that the US unemployment rate is at 8.3% and rising. China is also facing unemployment (20 million unemployed), the same to Germany and many other nations. The economy is so important in the developed countries that such an issue can overthrow governments out of power. Look at Iceland; upheavals led to the countrywide protests leading to the resignation of the government due to their slow reaction over the countries economic woes. The developed countries are looking at the newly industrialised countries for support. These include the BRIC powers of Brazil, Russia, India and China. China has invested in the US treasury bonds to a tune of $ 1.2 trillion and this explains their confidence in the US economy despite their recent losses in investment in US firms such as Morgan Stanley. One of President Obama’s top security advisors mentioned that the economy surpassed terrorism as the number one threat to US national security. I’m not surprised by that statement in that Obama mentioned top on his agenda was to solve the economic crisis. Issues such as Iran, North Korea, Russia or Darfur have been left to his Secretary of State Hillary Clinton. Psychologists say that during stressed times; humans have a tendency be to more innovative and creative with whatever little they have. As of now, I’m waiting some innovative idea to overcome this global malaise. Contact: akagenza@yahoo.co.uk