When dollars make no sense - market crisis in progress

When dollars make no sense – market crisis in progress

Oct 12, 2008 Clarence E. Pilgrim, Features / Columnists

By Clarence E. Pilgrim

While a Four Seasons hotel offers a room for US$30,000 a night, many anguished souls who are casualties of today’s global financial markets crisis, are burning many hours trying to re-position their portfolios (and jobs), as the volatility of stocks and bonds inflict new and uncertain challenges from dawn to dusk in the open trading markets.

All of this is happening ahead of the upcoming crucial G7 meeting, when the wealthiest nations hold what may be an extraordinary meeting.

Central banks around the world coordinated the slashing of interest rates to give positive stimulation to a negative index.

This aggressive and proactive move has helped to slow down the crisis, but unfortunately does not stop it. It has failed to give the kind of shareholder /investor confidence which is necessary for full market stability.

Nations have intervened to bolster failing financial institutions within their countries that have a cross-border reach.

The Icelandic government recently performed this action as it has now moved to secure its major banks, including the Kaupthing Bank, the largest one that has billions of dollars globally.

The government in this case is attempting to guarantee some protection to the small savers, but may not be able to cover the larger account holders. As a matter of fact, some believe that if the situation is not handled carefully the country could be facing bankruptcy.

Only up to the time of writing this, the Asian financial markets are trying to regain some composure. However the International Monetary Fund is pessimistic, and its report indicates that it will take some time for the world’s markets to recover.

This market downturn has, however, improved the value of the trade in gold. Hence, there is a move by some to purchase this precious metal as asset security in this existing market volatility.

It is an understatement to suggest that it is important for a recovery plane to be carefully defined. The ten steps (which are by no means exhaustive) I think should be taken to weather this economic storm is as follows:

1- Central banks around the world must jointly plan and coordinate more actions similar to the decision to slash of interest rates.

2 – Governments should continue to bail-out specific financial institutions but with a definite cap on the amount of assistance offered.

3 – Governments and Investors must work on re-building confidence and optimism in the markets.

4 – Debt forgiveness or write-offs must be considered for major developmental cross-border projects where there is a clear case that re-payment is not practical.

5 – Major credit card companies should considerably reduce their interest rates and invisible charges, in order to stimulate greater cash motility and reduce the overall credit debt.

6 – Health Insurance companies should work together to produce affordable individual and family plans, at a reduced premium. This is geared towards universal coverage, thus increasing the input base.

7 – Commodity diversification in the agricultural sector is necessary for less dependence on a limited range of crops such as wheat corn, soy bean etc. National food production plans must be coordinated, inter-linked and managed for effectiveness and efficiency.

8 – The Britton Woods institutions should immediately put together a “think tank” to define the specific reasons which contributed to what is happening now, and what steps ought to be taken on navigating through this period. This initiative should be under the guidance of the United Nations Security Council, since it has implications for undermining world peace.

9 – Accelerated actions should be made towards the development of alternative energy sources, to effectively lessen the current dependence on the chemistry and cost of fossil fuels.

10 – World governments must work closely to discourage unchecked multinational monopolies of financial institutions, which would have a devastating impact on the inflation or collapse of prices.

In this time of world crisis which some have described as a “perfect storm”, decisive and knowledgeable leadership is critical. The managers of our economies must seize the initiative and rise resolutely to the challenges of this occasion, by finding the solutions where others are unwilling to go.

When I read of impossible stories becoming possible, like the double arm transplant of Mr Karl Merk in Germany, who was living without arms for six years due to a farming accident, I am optimistic that we can indeed make a way to overcome obstacles and achieve success.

We need to transplant order and stability into an economic condition which has the potential of creating a world-wide recession, thus increasing poverty and helplessness among the most vulnerable. Let us rethink, coordinate and execute a workable plan – together!

Clarence E Pilgrim, is an environmentalist, advocate for human rights, educator, a senior officer in the Antigua & Barbuda Civil service and volunteer for various non-profit organisations.