As I have said earlier in my article 'American Get Screwed' it is still a big question mark whether the US$700 billion is sufficient to bail out the sick US economy and predicted that the shock waves would hit the shores of other countries soon.It has begun and is only the beginning.The real tsunamis have not started yet.
The domino effect will certainly take place as many of the markets are indirectly links through many of the huge hedge funds that placed their portfolios in the global baskets. Wall Street has always, for some unknown reasons, been the barometer for other markets to follow. It's the triggering mechanism for boom or bust.
It is not the collapse of the stocks markets that is most worrying and one that could cause major catastrophe, it is the banking system that would decide whether we would go into a major financial disaster or not.As long as the banking system is sufficiently liquid the world major economies would be safe.If it is not than a major catastrophe is not a figment of one's imagination.
The collapse of Lehman Brothers was most unexpected and the US government has allowed it to be the sacrificial lamb and sent it to the grave to save some other bigger monsters. The unprecedented major equity taking in AIG by the US government could be a trend of things to come as it implements it rescue plan.The government could end up becoming reluctant shareholders in many major corporations.
In 1979 when the US Congress agreed to bailout Chrysler there were major outcry, protest and objection from the business community and Lee Iacocca ridiculed by the press for his effort to convince Congress.The rescue package was only US$1.5 billion then, not in cash or equity, but in loan guarantees and was paid back by Chrysler ahead of schedule. Today the enormity of the rescue package and the number of companies to be rescued is mind-boggling and nobody blamed or ridiculed George, his Treasury and Federal Reserve for the failure to regulate the banking system.Because they all wanted George Bust to get the money for them so they wouldn't go bust.
The man who now handles the rescue package is Henry Paulson the Treasury Secretary who gave the US$700 billion to a 35-year old wiz-kid from Wall Street to head and manage the rescue plan.
The de-regulation of the of the financial system was the biggest culprit to this messy affairs for which the Bush Administration and his financial regulating arms should take full responsibility.As President he had failed to take action to reverse the laissez-faire and take immediate action to regulate and stop the greed and excesses in the system.
Although it may be too late to lay the blame, the American people should be made to know that they have a President who are more prepared to show the world the military might of the nation by going to wars at the expense of the American taxpayers and the innocent lives of non-American people abroad.
The next US President that carry on the same policy would also fail to arrest the economic problems as what had happened under Bush's policies.He spent more time with the generals than with the economists and failed to see the even bigger danger than Osama Bin Laden and his band of terrorists, the internal threat of a failed economy that can bankrupt the nation.
With banking failures occurring in almost every major economies the doom scenario could only be averted if those governments took immediate measures to save the financial system from breaking down.
The financial meltdown in the West may not necessary affect the Asian financial markets in the presence but would certainly affect the GDP growth in most Asian countries that have huge export bills to the West.The problem that can eventually affect Asian major economies is if the West is unable to recover and its recession turned to depression.
A loss of confidence in the banking system and attempts to taking money out of it by panicky depositors causing serious run on banks in any of the major economies could contagiously spread panic and run on the entire banking system of the world.
By then,the US Government can keep on printing the worthless 'greenback' and bankrupt every nation on this earth.
When that happened, only God and Robert Mugabe can help us.