The US financial crisis
The great Wall Street
crash that has sent the US economy reeling is already having its
repercussions on the world's financial markets even threatening
the entire global monetary system.
The worst fears appear to have been doused at least for the
moment by a temporary bailout offered by US President George
Bush. Following the House rejection of a US$ 700 billion bailout
the Senate yesterday voted 74-25 to amend the proposal. The
media described it as a 'sweetener' in the hope of getting the
This it is hoped would ease a deepening credit freeze and
volatility on global stock markets triggered by the Wall Street
Earlier the House voted 228-205 against the release of US$
700 billion of pubic money to buy devalued stocks, which sent
the Dow Jones Industrial Index crashing to its record fall.
The crash has sent the economies of many developed countries
into a tailspin. The reverberations of the crash has already
been felt far and wide. Ironically one of the countries gravely
affected is Russia which was once insulated from the orbit of US
Today along with other countries of the capitalist world it
has borne the brunt of the Wall Street crash which has seen it
lose nearly US$ 400 billion on the stock market. Already two
banks there have been bailed out by the Government but chaos
reigned in the once rigid socialist economy.
It is said some wealthy Russians had been reduced to poverty
while financial moguls have lost nearly two thirds of their
Most affected in the US though is the poor and the middle
class who would now be cut off their credit, hire purchase,
housing loans etc.. The crash could also have its fallout on
next month's Presidential elections perhaps a reason why both
candidates have decided to support the bailout plan.
President Bush almost pleaded with Congress to accept the US$
700 billion bailout option to prevent permanent damage to the US
economy. The next two days would prove crucial as the House
mulls over its decision.
In the President's words, "we are facing a choice between
action and real prospect of economic hardship for millions of
Americans". European markets had recovered briefly in the hope
that another bailout package would be passed.
The President has welcomed the passage of the Bill and called
on the House to act in the next two days to avoid further damage
to the US economy.
The whole issue once again brings to the fore the
vulnerability of the global economy to the vagaries of the
world's financial super power.
Being further away from the centre of gravity a country like
Sri Lanka may not feel the immediate pangs of the financial
But for all that we have been showing resilience in the
matter just as we did during the South Asian financial crisis
that triggered a similar domino effect on regional economies.
While we cannot live in isolation in a vastly shrinking world
order and our economies are inextricably intertwined with the
global system,the present crisis once against drives home the
need for economic prudence.
True, our economy too is sensitive to global financial
intricacies but if the basics are handled properly we would be
able to wriggle out of any situation as it has been proved on
this occasion. The US lesson more than any the factor should
drive our economic planners to exercise prudent judgement that
would eventually save the day for the country.
More than anything we should prepare a sound domestic base
and meet the goals of self sufficiency in all spheres. This
would help us a great deal in overcoming global economic tides
that may buffet us from time to time.