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Building an Open Future [This Network is not currently active and cannot accept new posts] | | Topics
World Financial Markets?Views: 209
Sep 25, 2008 6:33 am re: World Financial Markets?

John Stephen Veitch
Today President GW Bush is pleading with senior members of both parties to support the proposal made by Henry Paulson to provide economic support for businesses which find themselves in possession of contracts which in the present financial environment have doubtful value.

The key problem is timing. They need a solution today for a problem that's been years in the making. The Paulson plan proposes to do what's easy to do today, to feed the sharks at the top of the feeding chain, so that sharks remain part of the financial ecology. I believe that's entirely wrong.

But I also believe that without massive political and financial support the USA is about to start a major depression. That's not desirable. Everyone knows it. Economists also know that by pumping money into the system you can keep it going, but the cost is inflation and encouragement of the unrealistic practices that created the crisis in the first place.

So what to do? In my view the financial stimulus should go to the bottom of the feeding chain. The stimulus provided by government should be matched by private sector funding. The key is to reduce the debt being held by Americans. But the help also needs to be directed to the people who are most at risk of losing their homes. So on a case by case basis, the extent of an individuals debt needs to be identified, their assets valued, and their ability to service their debt out of income assessed. According some agreed principles and rules, some people are bankrupted, some people get principle reductions on their loans.

In this way the financial stimulus gets to the heart of the problem, reducing the debt. BUT that's going to take time, and it's likely that so much time is simply not available.

So we're likely to get a quick an dirty "fix" that rewards the people who created the crisis and profited from it. A mixed solution, help with the cash flow offered to the big boys in the short run, and correction of the debt problem in the looooong run.

The worst feature of this is that the POLITICAL MASTERS who are ALSO responsible for creating the problem get to play hero and come to the "rescue".

For all the rest of us. One year, maybe two years of reduced income, increased costs and perhaps struggling ourselves whit debt we can't afford to sustain.


John Stephen Veitch
Open Future Limited - http://www.openfuture.biz/
Innovation Network - http://veech-network.ryze.com/
Building an Open Future - http://openfuture-network.ryze.com/

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