Thursday, October 02, 2008

Little enthusiasm for new bail out plan

Watching CNN International this week, one would have thought that nothing had happened anywhere in the world. There is only one story that has dominated the airwaves, that of the financial crisis. There was mention of the stampede in India which killed over 150 people [CNN] but bombings in the country or its neighbour Pakistan barely got a mention. Even a bombing in Iraq only made the rolling news ticker at the bottom of the screen [CNN].
For the West there is only one story and that is the ‘credit crunch’, the ‘financial crisis’ or the ‘Wall Street crisis’ as it’s been labelled by the various media organisations. Will Hutton, a financial journalist, speaking on This Week, said, “I’m scared for the first time in my career”. He said he couldn‘t see where it might end and said in some ways it was a worse situation than 1929 before the Great Depression. “I think we’re on a downward vortex” he said, and “politicians are out of their depth”. As regards the causes, he said it was more than just the bad debts, sometimes referred to as ‘toxic debts’. “It’s a systemic crisis” he said.

The road to recovery not only required the Paulson plan which solves the toxic debt problem, but needed a plan for the re-capitalisation of the banks, Hutton insisted. But it has taken nearly a week to come up with a new plan following the rejection of the so called Paulson plan. The new bail out plan is not being greeted with much enthusiasm however. Shares fell sharply on Thursday and the markets have faired little better throughout the week [BBC]. The bill successfully passed through the US Senate on Wednesday and will be voted on in the House of Representatives on Friday [BBC].

Some savers in the UK were transferring their money to Irish banks with the promise of security. They might have better security in gold which has risen significantly recently. One artist has certainly poured some assets into one such commodity in the form of a statue of Kate Moss. Weighing in at 50 Kg, the work of art is valued at £1.5 million [BBC], not enough to bail out the banks, but a tidy sum nonetheless.

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