Thursday, October 23, 2008


Clearly the world is in the midst of a serious financial crisis and my intention is not in anyway to belittle the seriousness of the situation. It does appear though that the response of the global markets and world governments has been an over- reaction. Almost all major world economies have announced rescue packages to banks and financial institutions to stabilize economies. The US$700 billion congress- approved package as well as the bail out of AIG in the US are all well known. Europe has also caught the cold with many countries announcing rescue schemes and guarenteeing bank depoisits. The dutch government has made a loan to ING bank.
One of the the inardvertent concequences of all this has been to trigger off panic in the financial world with many institutions wary of lending and a cut bank on investment financing. There has been a rush of panic all over the global financial system and even institutions that are not yet touched in a real way by the credit crunch are in an artificial crisis mode. The result is that fear is dictating business decision making and the credit crunch has been made out to be much larger than it really is. The western financial system, from which the rest of the world takes cue, is behaving as though we are in the worst case scenario already and have skipped the preliminary stages. Consumers are wary of spending and banks dont want to lend to businesses, further excerbating the crisis. Yes, there is a crisis but is our response measured? Are we building confidence in the global financial system?


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