faces hard times as economic depression looms
by Jenny Luesby
October 27, 2008
Market screens flashing rows of red prices falling too fast
for the naked eye is the stuff of investor nightmares.
In recent weeks
it has been a scene replicated worldwide, as the globe has
seen much of its wealth annulled in sell-off followed by
Yet the market
crash that has rattled so many shareholders, and devastated
the western world’s pensions and savings, is only
the tip of an iceberg.
Many now acknowledge
this as the likely beginning of a world economic depression,
possibly more severe than the depression of the 1930s.
The urgency and
need to head off soaring unemployment and plummeting output
has spurred world leaders to seek a world conference similar
to Bretton Woods, which created the world’s current
financial system, including the IMF, World Bank and Central
Bank regulator, the Bank of International Settlements.
As blame shifts
and hardens over the flaws in the financial system that
brought the world to a financial melt-down, a reshaping
of world financial regulation and support is undoubtedly
But a global
rebuild on how much risk financial institutions are allowed
to take, and how much support the world can offer those
who stumble, will not address the pay-back for the mistakes
made to date.
The bigger and
more immediate challenge for world policy makers, as statistics
roll in confirming hundreds of thousands of redundancies,
stockpiling house repossessions, and a generation of employees
who can no longer afford to retire, is how to head off a
vicious downwards economic spiral.
makers need to find a way that is not too devastating of
calling a halt to consumer debt and living without the “virtual”
wealth represented by previously overvalued shares, houses
and other assets.
In reality, there
is only one possible path to any kind of soft landing. Yet
it remains far from delivery.
Just as countries
and companies are brought back from the edge by rescheduling,
western consumers have no other path.
Yet a nervous
and threatened banking system has shifted gear into ruthless
inflexibility in tolerating late payments and adjusting
for consumers’ financial plight.