International markets are a rowdy time and the economic crisis has spread around the world, highlighting weaknesses in each country of each. U.S., world economic leader and global capitalism's nerve center, its economy is cleansing undesirable elements ( subprime mortgages , bankruptcies, and financial assets away) and this has caused the rest of the world, completely dependent on the U.S. economy , has caught a cold monumental.
The housing bubble has become " crash, we are in a recession credit, with oil prices clouds, the slowing economy, rising unemployment and escalating inflation free. So the economic crisis spreads at full gallop. Its devastating impact has shaken the institutions exposed to mortgage and credit risks high risk.
The huge bailout by the Bush Administration released September 20 shows the magnitude of the problem. First there were plans to assist Fannie Mae and Freddie Mac, which have the titles of half the U.S. mortgage debt, a figure higher than $ 11 trillion, then came the crunch of insurer American International Group and finally the government's mega plan of 700,000 million dollars to buy garbage assets held by banks, issuing debt to fund operations, and re-sell them. The plan also provides for the temporary ban on the stock exchanges operate some 800 companies engaged in "short sales or discovered" (short selling) and Treasury guarantees to investments in money market mutual funds. For now, announced financial aid could exceed approximately $ 1.8 billion, in the absence of new conditions and details, which will be announced soon, when there is bipartisan agreement.
Is it really needed this intervention? Bush, who has all the necessary information (as opposed to those who believe happily), advised by experts who monitor the crisis from the frontline, and still the U.S. president (to the chagrin of some and the satisfaction of others) has spoken loud and clear:
"Our free enterprise system is based on the conviction that the federal government should intervene in the marketplace only when necessary."
And this time it is, given the huge problem. Remember aids hitherto granted to financial institutions and homeowners, due to the mortgage crisis, and amount to 630,000 million euros, four billion dollars have evaporated from Wall Street, have left at least 350,000 of investment portfolios fatten the effect of losses, thousands of lost jobs, bankruptcies of investment banks and four million homes have been seized in U.S. To cite only a few relevant data.
Some scholars even spoke black swan already or total collapse of the system.
investment banks like Lehman Brothers, bankrupt and was bought by Barclays Bank, and Goldman Sachs and Morgan Stanley, have been subject to market forces and risk. Sometimes he won, and much, and now I touched lose.
This does not mean an end to the U.S., neo-liberalism or capitalism, as earnestly proclaim and manifest ignorance always sectors. And there were other crises in the past: the Great Depression of the 29 (infinitely more disastrous, with hundreds of banks failed, people lost everything he had, a 25% unemployment and a social tear from coast to coast), the financial crisis Asian late 90s, the bankruptcy of enterprises. com in the 2000s, he played the tech bubble and sprayed billion on Nasdaq, or the stock market crash of October 87, junk bonds from Michael Milken when the world's stock collapsed and fell in free fall, only then Wall Street lost 22.6% of its value, or $ 500 billion.
So, please, "analysts" of various hair coming out everywhere, stop giving grilled on the subject.
The market could handle the current mortgage problem, true, then Why intervene? Why would a government like that of Bush, defender of free market performs that bailout? They question the liberal luminaries and even the "experts" and "enlightened" progressives.
The answers are neither easy nor simple, but synthesizes: the risks of uncontrolled situation could end up contaminating the rest of the economy healthy, in fact, has already caused enormous financial turmoil, huge losses and a worsening crisis that extends and has yet to travel to purge the excesses and greed of recent years.
crying as they walk possessed that the U.S. has embraced socialism to intervene in the market are as wrong as those who deny that this bailout will be effective or necessary, or bawling progressives who claim that the Bush Administration also uses nationalizations to solve the problem and that is the end of the free market.
First, the announcement Bush's plan has brought a measure of confidence that all markets have appreciated. That is obvious. It was necessary to clear leadership on this issue and the anti-crisis plan that leadership brand. Because it says loudly and clearly that the U.S. government will take seriously the management of these funds trash that pollute and distort financial markets. With these drivers, the money will circulate normally and confidence of international markets. A trust will be moving to the stock markets, the street and the public.
While Europe is still debated what to do, the U.S. takes the initiative and takes measures to solve the problem.
However, such standardization also depends on the implementation of a suitable plan of redemption, proper management and the scope thereof, should not become an ongoing intervention in the economy. Those who go around shouting that nationalizes U.S. and do not know what more stories about the U.S. economy is bankrupt, the end of free markets and other crap like that, know that this situation is serious, of course, but not the end of American capitalism (quiet, may still be ranting against the U.S. after denouncing this crisis or other crises in the future) should know that the huge size of the U.S. economy and its formidable capacity to generate wealth can absorb these losses and reverse the situation to rebuild optimism and economic growth. Especially if, after cleaning up the system, let the free market to generate new economic opportunities, as has been done in the U.S. forever.
The key is to manage well the intervention and stop it at the appropriate time to free market forces to stop the American economy thrive. It is a difficult balance because the plan will also need the free market to function fully. But it is feasible.
Recall that during the decade of 30 the Reconstruction Finance Corporation, launched by the administration of Herbert Hoover, and weathered and managed investments during the Great Depression.
In 1989 there was a similar rescue of the mortgage debt of 1043 savings banks and regional credit, estimated at 400,000 million dollars, into receivership after the bursting of another bubble, through the Resolution Trust Corporation (RTC), which also cost taxpayers money, in principle, although made after management was able to recover half of that money. We all know that most of the banks involved closed, but the free market system continued to operate after that.
Now the same thing happen again, but we need to know that economic health will be necessary.
Does this mean it's okay what happened? No, listen, much less.
The culture of debt, a little capitalized financial system, the high level of indebtedness of the people and the rampant consumption over one's own possibilities, is at the root of the problem, together with a drunken banking profits at any cost, abuse of financial engineering based on debt, certain officers and directors seeking the maximum benefit with financial products increasingly risky, and some financial regulators, and rating agencies and central banks, apparently, were on vacation, taking drinks, or who knows what .... when it passed the chaos father. In fact some of them knew the chaos, both involved in it.
The State will be involved in any steps to impose order, as an exceptional measure. The manner and extent to which such intervention is managed and the amount of money being injected into the market, is the key to the whole heart. Because it is logical that the system is protected and safeguarded from the risks of "economic surplus" or "toxic" to prevent massive infection of the system, but it is also responsible for the taxpayer does not have the money to pay the cost Full of the madness of those who lived above their means and the greed of the banks, executives accustomed to easy money without effort and great leverage (leverage ), and the connivance of some of those working in the system regulator and supervisor.
The proper management of this plan and return to the free market as soon as possible are the keys to the government, banks and taxpayers may earn or minimize losses rather than take a monumental bump or open the door to a crisis yet higher.
Those who think that only U.S. will withstand the effects of the financial storm, they are completely wrong. Spain, with slight variations, has the same problem of housing bubble and subprime mortgage crisis (call it 120% mortgages exceeding the value of the property financed, credit risk, credit unions real estate, capital ratios damaged by low stock , delinquencies increased, funding cashless artificial valuations, a current account deficit exceeds 10% of GDP, corruption, inefficiency, lack of competitiveness, high household debt, etc, etc), and that this outcrop is matter of time and form. By no means Spain will be immune to this crisis, even though the socialist government waste Zapatero, inefficient and competent handling the information to their advantage (blaming the U.S. or Bush around, as always, nothing new in this ideological quagmire of socialism English) and contributing little or nothing to solve economic problems English. Moreover, not surprising coming from a friend of "jewels" like Chavez, Castro and Ahmadinejad, the kind that did not rise to the passage of the U.S. flag, and that justice, well you are paying and will pay. There is still much
crisis until the end of the tunnel and see the light of new economic growth, prosperity and health. The solution, as always, will come of their own U.S. And that solution will have much to say the next president, whether Obama or McCain, as we are looking at end of campaign. Indeed, it was the Republican candidate who has placed their latest initiatives, the country's interest above electoral situations.
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