Skip to main content

The financial future

We learn from mistakes. The terrorist attacks of September 2001 helped us to take terrorists far more seriously. The global financial crisis of 2008 can help us predict the next crisis and take necessary back-ups as we cannot avoid a financial crisis as per economist Keen, the one who predicted the last crisis. The failure of Lehman brothers unleashed chaos, but it's not the only cause. It is also expected that after huge rate hikes specially by the Fed have resulted in a recession, and like other crisis, there is reason to believe that this is also going to be the same.

The size of financial crisis maybe reduced. The banks are now in more equity and less debt, also, they depend less on trading to make money and on short term wholesale borrowing to finance their activities. The banks must be kept under regular surveillance and keep a check on their plans and the NPA's. The 2008 crisis was neglected by most of the economists due to the 'great moderation', but this can't be the case this time, we have learned from our mistakes. Not always. After the 2008 crisis, the government of America should have stood beside the failing banks but instead abandoned insolvent households, due to this many Americans lost their homes, unemployment also rose. The financial crisis also unearthed a number of long term problems which were needed to be taken care of- housing, offshore dollar finance, and the euro.

The next financial crisis is expected to involve property, as none of the governments have ever boosted household credit. Every State's financial regulations encourage banks to lend against property rather than make loans to business. But politicians fail to realise the gain from this regulation. They fail to give incentives and perks such that there can be a boost to household loans. The value of American dollar has also varied from the last crisis among various countries. The only country that dealt with the crisis properly was Iceland. They designed a comprehensive accountability policy, based on two objectives: establishment of the truth, and punishment of the responsible. An independent commission was also established to look after the matter, and immediate actions were taken based on their report. In the awakening of the next global financial crisis, we must learn lessons from Iceland and implement them accordingly.


Comments

Popular posts from this blog

Indian Constitution: the unfulfilled dream

 As we celebrated the ‘Constitution day’ on 26th November, bragging about being the world’s largest democracy, the question we failed to ask ourselves is whether we have truly lived up to the essence of our constitution. The Constituent Assembly of India had adopted the Constitution on this day in 1949, and the current government decided in 2015 to observe this day annually as the Constitution Day. Our Constitution declares India to be a “sovereign, socialist, secular, democratic republic and to secure to all its citizens justice, social, economic and political; liberty of thought, expression, belief, faith, and worship; equality of status and of opportunity; and to promote among them all fraternity assuring the dignity of the individual and the unity and integrity of the nation”. Even though our constitution offers so much, the printed media has repeatedly pointed out the inability to uphold them. To quote Granville Austin from his book, Working a Democratic Constitution, the cons...

The Japanaese Renaissance

Whenever we think of Japan, we think of Hiroshima and Nagasaki. The Second World War had left Japan completely devastated, depleted of its teeming potential and resources. After 74 years, Japan has metamorphosed into a world power, flaunting its suave in multilateral fields.With t he excitement of the Tokyo 2020 Olympics all around and shops ready with official merchandise, Japan is pushing the accelerator on full throttle to showcase their best.  My recent visit to Japan was worthwhile, a revelation in itself. The rapid development of Japan never fails to awestruck anyone. The main shifting point was during the Meiji dynasty - during which Japan faced a huge technological, political, and educational influx from the western nations and broke out of their isolated cocoon. Since then, Japan has no turning back. The disciplined traditional nature of the people along with their quality education have contributed a lot to this development. Recently, the Japan government has decide...

The re-organised Kashmir

The Kashmir crisis goes way back to our independence. With the partition, Maharaja Hari Singh of Kashmir was in a dilemma whether to join India or Pakistan. After the Afghans backed by the Pakistan army unethically attacked on Kashmir, Hari Singh approached Nehru for help, thus, joining Kashmir to the Indian territory. It was this which paved the way for article 373 and 35(A). Article 370 and 35(A) provides the state of Jammu & Kashmir a host of special rights. These special rights are frequently debated. Until recently, both the articles were scrapped with a majority sweep for the notion from the BJP led government. The chaos in Kashmir - both internal and external, was prevailing for a long time. Everyone needed a solution to this issue. Strict precautions were taken by the authorities to prevent any opposition - Internet connectivity was snapped, eminent figures like Mehbooba Mufti, Omar Abdullah, were put to house arrest, the number of armed forces was increased, article 144...