October 3rd, 2008
09:11 AM GMT
Share this on:

LONDON, England – Anyone looking at the bail-out package as the salvation for the banking system or the U.S. economy is dead wrong. The problems in the economy and the banking system have gone far beyond what the package can fix.

We know it's not just a U.S. problem. There are fears of a worldwide recession.
We know it's not just a U.S. problem. There are fears of a worldwide recession.

There is a crisis of confidence in the financial system, and that won't be fixed by the bail-out package. There is a crisis of confidence in political leadership. There is a well deserved mistrust of Wall Street and others whose greed and recklessness got us into this mess. And there are signs the U.S. economy continues to get worse, including house prices which continue to decline.

And we know it's not just a U.S. problem. There are fears of a worldwide recession.

According to George Magnus, senior economic adviser at UBS, about 40 percent of OECD economies are in effect already in recession. He puts it all down to deleveraging, as banks cuts back on their lending. He's pessimistic as are others, as I have been in the past and continue to be.

As he told the Financial Times: "What got us out of the hold in 2001 was it was possible to cut interest rates very sharply. And there was a sector that was willing and able to crank up leverage, the household sector.

"Apart from the government, which is going to have to come in and offset the weakness in private borrowing and demand, I can't see anyone else in a position to spark an economic renaissance."

While the U.S. and other countries feel the economic fallout, the U.S. is paying another price for the unwinding of its excessive leverage and the resulting bail-out package, and it can't be measured in financial terms.

With the massive bail-out package the U.S. has lost its moral authority as the beacon of free markets and capitalism.

We took freewheeling capitalism to the limits and the wheels came off.

Others point to other economic models such as the Chinese model as offering more stability. The world is watching and the reverberations of this crisis for the U.S. will last long beyond the crisis itself.

Tell me what you think, do you agree that the bail-out package won't fix the real economy? Do you agree that the United States has lost is moral authority as the beacon of free markets and capitalism? Is the legacy of this financial crisis one that will linger long beyond the crisis itself?

I look forward to hearing from you.



About Business 360

CNN International's business anchors and correspondents get to grips with the issues affecting world business, and they want your questions and feedback.

 
 
Powered by WordPress.com VIP