sábado, 20 de septiembre de 2008

The Trillion Dollar Meltdown

The Trillion Dollar Meltdown
A look at the best selling book by Charles R. Morris
Alfredo Ascanio (askain)
Published 2008-09-20 17:03 (KST)

"We are living in the most reckless financial environment in recent history."

This is the opinion of the writer Charles R. Morris in his book "The Trillion Dollar Meltdown."

According Morris, the abusive financial levers to investment banks and hedge funds and private equity practically have disturbed global markets.

Everything that has happened explains how we got here, and what is about to happen. After this accident our priorities will be very different. But things may get worse before they improve. The author of this book emphatically believes the death of liberalism is to come.

All this financial disaster what we call "a tsunami of dollars" reminds us that always exist in these events: Winners and losers.

For those who ask, "Why it happened?" Here in this book is a place to get some answers. It's a wonderful explanation of how it happened.

Morris joins the dots between the Keynesian liberalism of the 1960's, crippling stagflation of the 1970 and the free market of 1980 and 1990, before entering the world of ultra-cheap money and the crazy financial innovation.

In his brief but brilliant book, Morris describes how the US was put into the mess we're in... Few writers are as good as Morris to make financial analyses understandable and even fascinating.

"Reuters said that all this is a very serious financial crisis. We must anticipate that in the coming weeks and months ahead there may be other financial institutions with some problems," said Dominique Strauss-Kahn, managing director of the International Monetary Fund.

The crisis could also affect the world economy although both developing countries as the most developed show signs of resistance, said Strauss-Kahn to journalists after a meeting with finance ministers and Central Bank governors of the Persian Gulf States.

"It's a very serious financial crisis," he said. "We still have ahead of the consequences for some financial institutions. We have to anticipate that in the coming weeks and months ahead there may be other financial institutions with some problems."

Strauss-Kahn made these comments the day after the US authorities arranged an $85 billion loan for American International Group Inc., saving it from bankruptcy.

"This generated a certain calm in the altered global financial markets. What we are experiencing these days is an increased risk of low and uncertainty, but we still believe that the world economy will recover in 2009," said Strauss-Kahn. "It's important to see that this has an influence on the real economy, but the real economy is very strong both in developed countries as in emerging."

For example, the annual surplus of China is equal to 12 percent of its GDP. And that figure, in 2009, is equivalent to the annual deficit of the United States.

The lesson to be derived from this is that there should be stricter controls, as noted these days by McCain and Obama.

Alfredo Ascanio is a professor of economics at Simon Bolivar University in Caracas, Venezuela.