Economic Slowdown - A Repeat Of 1929?

The rapid growth of telecommunication with the emerge of IT industry has kept the GDP and different growth parameters steep rising post 1990s.However far beyond the imaginations and expectations of researchers, experts, analyst across the globe the recent turmoil in credit market, banking sector in the banks of USA, European and few Asian banks are the largest since 1929.

The criticality of the current world financial situation has indicated a strong need to strengthen and perhaps reinvent our existing economic and financial models and practices. The financial rescue, or bailout if you prefer, packages put in place just recently initially did little to stop the plunge in stock indexes. Admittedly it will take some time to tell if these financial aids will have the desired effect of turning the USA and global economies around.

The demise of larger financial institutions such as Lehman Brothers was not totally surprising to everyone. An analysis of Lehman Brothers business model, their policies, lending strategies and basic business practices would seem to make the eventual downfall of the company inevitable. It is strange that with an abundance of danger signals that the fall of the company was not predicted much sooner or at least in time to have done something constructive about it. Instead employees and shareholders were left holding a rather empty bag.

We have to ask, how many other financial institutions face the same fate and what financial help to retool their business models. What is it that needs to be done to enable our economies to get back on track and experience a solid and sustainable growth rate once again. Even the G7 has yet to find the answer to this dilemma.

The US and China have been working together to attempt to get tings turned around with perhaps some success. However, even if these to major economic powers experience some success in achieving a recovery, the other Asian and the European countries have to be fully involved in the process.

The practice of instituting financial rescue or bailout packages begs the question as to how long and at what cost will financial institutions and economies be able to withstand the pressure leading to future debacles. While the financial situation is under repair the investor has to review is or her own patterns of investment to determine how, from this time forward, to gain a sustainable growth rate.

So it is really up to the political leaders of the affected countries to step up and cooperate in finding the means not only to reverse the current situation but to prevent a reoccurrence as well. Until that happens the small investor, and perhaps the large investor as well, needs to be very cautions as to where they are putting their money.

We may feel sometimes that a plunge in the stock market affects only the major stockholders, the "big boys". It is not always apparent that a decline in the stock market means that companies issuing stock suddenly find themselves with insufficient capital to meet their goals. The results can mean decreased production, lower wages, and lost jobs. Eventually these negatives can and will affect the average citizen. As a part of any recovery package the average citizen needs to be educated as to what the big picture means to him or her.

Tags: Business