What is the projected budget deficit of $ 1.85 billion American mind? In numbers, it becomes like this: $ 1,850,000,000,000. O followed by 185 zeros ten. In recent months we have had so many numbers thrown at us by governments, banks and the collapse of hedge funds that can be excused for forgetting that they all represent almost unimaginable amounts of money. Money, indeed, that has lost all of a sudden, almost like the disappearance of the mountains in a large black hole.
Of holders and balances, these huge losses are now visible in the store and approached unoccupied houses in countries worldwide. Fortunately, countries such as Pakistan have been partially insulated from the evaporation of liquidity that has frozen the banking systems of many developed countries. However, a sharp decline in demand for exports from developing countries has destroyed jobs indiscriminately. And this rise in unemployment is having a huge impact on national economic activity and consumption.
But in the developed world is that the recession was biting deeper. How to reduce the size of firms in a desperate effort to stay afloat, suddenly hundreds of thousands are unemployed. Professional middle class, accustomed to a comfortable lifestyle, are increasingly found in the streets, unable to pay the rent. Children who were studying in England some of the best schools have been transferred to state schools. The best restaurants are offering deals that would have been impossible just a few months ago.
We have been out of England for more than four months, but have had a succession of friends coming to stay there with us in Sri Lanka. Without exception, they all advised to stay away as long as we can. They have also given graphic accounts of neighborhoods, friends suddenly have to cancel the holiday and the families struggling to make a living. All the high streets have witnessed well-known retailers raise their blinds. Bankers are being turned into social occasions.
In the U.S., economic epicenter of the merger, the plight of the people is even more painful. After years of growing prosperity, millions are out of jobs and employment. The pain is palpable. For these people to see well-heeled fat cats, widely perceived as the cause of your misery, get obscene bonuses in the midst of the wreck has caused tax is like a red rag to a bull.
Recent developments in the giant insurance company American International Group, has provided the world (and President Obama) an idea of the depth of the anger that stems from Wall Street. If an institution can be said that the main cause of the current crisis, it's AIG. And if a person can be said to have caused the collapse of insurance giant, is Joseph Cassano. In a research paper entitled The Great Asunción sent March 19 by Matt Taibbi in Rolling Stone magazine, the author notes that in the three months ending December 31, 2008, the company lost $ 61.7 billion of dollars, the largest quarterly loss posted by any company anywhere. This translates into a loss of $ 27 million an hour. Taibbi writes reckless Cassano (and unreported) relates:
"In the space of just seven years, Cassano sold about $ 500 billion of CDS [credit derivatives swaps] protection, with about $ 64 billion tied to the subprime mortgage market. AIG did not even have a fraction of that amount of cash, but do not expect to ever need reservation ... AIG was essentially huge collection of insurance premiums through the sale of the catastrophe that never come ... "
The unit of sale of such financial instruments of mass destruction was a subsidiary called AIG Financial Products, and had 400 employees. These are the same people who were recently rewarded for their services through bonds amounting to about $ 200 million in tax money to the company to bail them out. Logically, this decision has caused unprecedented frenzy. So much so that management has warned employees not to go alone, and appointed guards for senior executives.
Deregulation of the financial system that made possible this amazing scam was echoed in the UK where Gordon Brown copied the American model, when he was Minister of Finance. Here too, the culture of greed took over, and small, stable societies credit were allowed to turn into major banks. Large banks were in a frenzy of acquisition, morphing into giant uncontrollable. But while the markets rose, regulators turned a blind eye to these excesses.
Financial journalists are so gung-ho. Until the end, they advise readers and viewers to buy shares in banks that were about to go belly. Risk analysts, rating agencies and internal auditors, or stay calm and collected their fees and bonuses, or warned of management, and is often shown the door of their problems. Madoff the infamous Ponzi scheme that cost investors at least $ 50 million spent despite warnings that it was all a house of cards. Similar systems have been carried out in Pakistan, and the best of my knowledge, the authors have laughed all the way to the bank.
Both the American and British governments are trying to solve the problem of throwing money at financial institutions that caused it. AIG, for example, has used its billions of dollars in ransom paid to banks that had bought insurance for their toxic mortgages. The Treasury Department hopes that by cleaning up red-stained sheets, it will eventually revive the financial sector. I have my doubts that the economy will remain depressed until the use and demand pick up. To the extent that people sit on their money, the factories will remain underutilized, and business inventories are exhausted before taking over the production.
Recently, Obama tried to calm the ire of some by saying he understood why people are angry, but added: "You can not govern from anger." Supposedly he did not have their life savings into shares. And certainly has not lost his job, although the current scandal has taken some of the brightness of the new presidency. Barack Obama still can not walk on water forever.
Of holders and balances, these huge losses are now visible in the store and approached unoccupied houses in countries worldwide. Fortunately, countries such as Pakistan have been partially insulated from the evaporation of liquidity that has frozen the banking systems of many developed countries. However, a sharp decline in demand for exports from developing countries has destroyed jobs indiscriminately. And this rise in unemployment is having a huge impact on national economic activity and consumption.
But in the developed world is that the recession was biting deeper. How to reduce the size of firms in a desperate effort to stay afloat, suddenly hundreds of thousands are unemployed. Professional middle class, accustomed to a comfortable lifestyle, are increasingly found in the streets, unable to pay the rent. Children who were studying in England some of the best schools have been transferred to state schools. The best restaurants are offering deals that would have been impossible just a few months ago.
We have been out of England for more than four months, but have had a succession of friends coming to stay there with us in Sri Lanka. Without exception, they all advised to stay away as long as we can. They have also given graphic accounts of neighborhoods, friends suddenly have to cancel the holiday and the families struggling to make a living. All the high streets have witnessed well-known retailers raise their blinds. Bankers are being turned into social occasions.
In the U.S., economic epicenter of the merger, the plight of the people is even more painful. After years of growing prosperity, millions are out of jobs and employment. The pain is palpable. For these people to see well-heeled fat cats, widely perceived as the cause of your misery, get obscene bonuses in the midst of the wreck has caused tax is like a red rag to a bull.
Recent developments in the giant insurance company American International Group, has provided the world (and President Obama) an idea of the depth of the anger that stems from Wall Street. If an institution can be said that the main cause of the current crisis, it's AIG. And if a person can be said to have caused the collapse of insurance giant, is Joseph Cassano. In a research paper entitled The Great Asunción sent March 19 by Matt Taibbi in Rolling Stone magazine, the author notes that in the three months ending December 31, 2008, the company lost $ 61.7 billion of dollars, the largest quarterly loss posted by any company anywhere. This translates into a loss of $ 27 million an hour. Taibbi writes reckless Cassano (and unreported) relates:
"In the space of just seven years, Cassano sold about $ 500 billion of CDS [credit derivatives swaps] protection, with about $ 64 billion tied to the subprime mortgage market. AIG did not even have a fraction of that amount of cash, but do not expect to ever need reservation ... AIG was essentially huge collection of insurance premiums through the sale of the catastrophe that never come ... "
The unit of sale of such financial instruments of mass destruction was a subsidiary called AIG Financial Products, and had 400 employees. These are the same people who were recently rewarded for their services through bonds amounting to about $ 200 million in tax money to the company to bail them out. Logically, this decision has caused unprecedented frenzy. So much so that management has warned employees not to go alone, and appointed guards for senior executives.
Deregulation of the financial system that made possible this amazing scam was echoed in the UK where Gordon Brown copied the American model, when he was Minister of Finance. Here too, the culture of greed took over, and small, stable societies credit were allowed to turn into major banks. Large banks were in a frenzy of acquisition, morphing into giant uncontrollable. But while the markets rose, regulators turned a blind eye to these excesses.
Financial journalists are so gung-ho. Until the end, they advise readers and viewers to buy shares in banks that were about to go belly. Risk analysts, rating agencies and internal auditors, or stay calm and collected their fees and bonuses, or warned of management, and is often shown the door of their problems. Madoff the infamous Ponzi scheme that cost investors at least $ 50 million spent despite warnings that it was all a house of cards. Similar systems have been carried out in Pakistan, and the best of my knowledge, the authors have laughed all the way to the bank.
Both the American and British governments are trying to solve the problem of throwing money at financial institutions that caused it. AIG, for example, has used its billions of dollars in ransom paid to banks that had bought insurance for their toxic mortgages. The Treasury Department hopes that by cleaning up red-stained sheets, it will eventually revive the financial sector. I have my doubts that the economy will remain depressed until the use and demand pick up. To the extent that people sit on their money, the factories will remain underutilized, and business inventories are exhausted before taking over the production.
Recently, Obama tried to calm the ire of some by saying he understood why people are angry, but added: "You can not govern from anger." Supposedly he did not have their life savings into shares. And certainly has not lost his job, although the current scandal has taken some of the brightness of the new presidency. Barack Obama still can not walk on water forever.
