If any comforts that the daily news can provide us today, it is that the so-called economic storms which ravaged through the Global economies has pretty much abated. Signs of liquidity among the banking systems have emerged; the global drain has been stopped, and now the repair works has to begin. I have to admit that the speed of the Western Governments and their Central Bankers in tackling the problems heads on with the tenacity and ingenuity, bold and timely moves should be credited with what have happened. It is quite interesting that the solutions that were brought in are in many ways mirror the problems that created the crisis to begin with. However, words of caution should still remain, as it is by no means that the Global Economy is out of trouble yet; except that it has averted an everlasting disaster of total Global meltdown.
The basis of the solutions is off course back to a very “old” economic theory of “Keynesian economics” with a lot of dosage of modern day tools. What Keynes argued for that under the circumstances, monetary policies are useless (and in fact can be hazardous) to tackle a seriously slumping economy (and banking crisis of large magnitude). What are needed are “stop gap” measures to stem the haemorrhaging financial institutions; which will restore confidence and to get the banks back into its lending business, so that businesses and consumers are back in their feet. This is to maintain the monetary base to be stable.
However, that is only half of the story, because to fill in the slack that has been created by the crisis (which causes high level of unemployment and slacking demands), the Government has to crank up its fiscal engine: by increasing the government’s spending. While the above recipe seems pretty standard in economic arguments, the magnitude of the exercise was so large, that in total, we are talking more than US10 trillion in its total sums. This what makes the “experiment” unique and unprecedented in our human history.
The next thing that matters is how we go about in repairing all the damages that has been caused by the crisis. Probably, this would be a bigger and trickier subject than the one described above. It is clear to me that there will be many “losers” than “winners” that emerges out of the exercise. One obvious group that will be “net losers” are the public. Many people have lost their savings and money by way of asset value depreciations – such as housing prices and share prices. While on the other hand, a stabilized commodity prices (such as oil price), may help the public in the long term as well. One thing that bode quite well was, nobody among the public lost their money due to bank runs and closures, compared to what happened in 1929. Quite a good number do lost their jobs, but if the recovery can pick up quite fast, then the pain will not be a prolonged one. Actually, the biggest losers are the Governments, because the eventual costs of the exercise can be quite massive and will only be known years later (and paid later).
In any case, we have to thank God that the disaster was quite brief (at least for now) and it seems that the way out is becoming much clearer. However, it must be cautioned that we are only at the beginning of a new phase – which has yet to be certain how the eventuality will appear. There are so many loopholes and potholes to be avoided as well as we must understand that should any new crisis started again, the economy are in so weak state that it might not be able to ward off another trouble.
This is probably more so for countries like Malaysia; with its political leadership and directions in a total limbo – might itself be the biggest recipe for failure. Failure is not measured in how have we “avoided the global meltdown”, but should be on whether we have enough planning and contingencies for “probable” events of the future. I have to admit that I am not of the same school of thought as Matthias Chang, whose outright rejection of the system, left you with no option except to scorn everything that you see; neither am I, an outright defender of capitalism, such that it claims to have solutions to all economic ailments that happened. We lived in a world where our control of events are extremely limited, save for what little thing that we do for our own selves. Therefore, first and foremost we have to look upon our self what we can do to safe guard us in the future.
My recipes (which I apply for myself) are as follows: (a) Save as much money as possible, since the days ahead are murkier and riskier by any measures. (b) Find any form of steady cash generators as possible, since your income might not even suffice to append your future cash flow needs. (c) Pay as little taxes to the government as possible, since they are the worst form of “savings and contributions” in their current state of affairs. (d) Invest whatever extra that you have not in the form of papers, but in tangible assets such landed properties or land itself. (e) Be global as much as you can, since a single country is so vulnerable to swings that are unpredictable. (f) Perform charity as much as you can afford, since that is the way you must give back to the poor and needy (i.e. the society). (g) Do your duty as a citizen by being a registered voter, and do vote when the times comes, because it is the least that you can do to overthrow any bad governments. (g) Read as much as possible, because being knowledgeable and aware is the most basic requirements of any modern day man.