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 House approval.

This it is hoped would ease a deepening credit freeze and volatility on global stock markets triggered by the Wall Street crisis.

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 influence.

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 financial capital.

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 upheaval.

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.