ON THE ECONOMIC FRONT
It is time to say farewell to the first decade of this new millennium. The first quarter of 2009 will be best remembered for the unprecedented financial crisis that gripped and consumed us. This tumultuous meltdown from USA is so contagious and seem that no nation were immune. It almost bankrupted the world and cause unimaginable hardship unheard off especially for those like me, born after WW2. No nations had the immunity to escape this contagious economic plague. Governments around the world worked frantically to implement economic stimulus packages to avert this impending financial catastrophe. Never in the history of the world did leaders from every nations simultaneously and spontaneously pumped in enormous amount of money into the financial system. Even with all the governments working overdrive, the public were not spared the fear of unemployment as the economic is predicted to go into deep recession.
By March, most markets in the world have collapsed to 10-year low. The mood, needless to say, was one of outright doom and pessimism. Across the world, all sectors of business slumped abruptly. Trillions of dollars were wiped off the markets. Our own government too lost billions when they decided to cut loss in their portfolios. No one dare predict the future. Analysts were divided whether it was going to be L, V or U shaped recovery. Some say even double dip recession.
By June, the stock market showed signs of recovery. This was in anticipation that the worst was over and stock markets continue to recover till the end of the year. Most markets have exceeded the 12 months high. It was really unexpected that the speed of the stock market recovery was so phenomenal. For the brave, huge gains and windfalls were made. What a paradox! the midst widespread pessimism at the beginning of the year and now. Many cautious investors were left high and dry, missing the opportunity of the decade.
The sub-prime crisis was supposed to be manageable US$1 trillion debt. It was believed by many economic analysts that US alone can withstand a massive default from the debts of this housing bubble. Even the FED chairman Bernanke admitted that he did not anticipate the severity and danger of this crisis. It also certainly reinforces the interconnectivity of this globalised world. The electronic and internet age spared no one and the speed of the financial tsunami that spread throughout the world left people with very little breathing space. As US market closes, market in Asia-pacific opens, followed by Middle East and then Europe and back to US. The domino effects of the falling markets were nerve wrecking.
In this crisis, many new terms was coined. The one that capture the most attention was “too big to fail”. Citibank, AIG, and GM were rescued at enormous cost with tax payer money.
Politically, this crisis has many implications especially on USA. It may marks the end of USA domination as the world sole economic power. It has become a net debtor nation. On the contrary, China with is hefty reserve may has perched up the hierarchy of world economic powerhouse. We now see the G8 may lose it relevance to G20.
more to follow
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