Short term gains for long term pains
Over the years America has been a source of cultural, economic, political, educational ideologies… From Hollywood to Harvard…. Citibank to Congress….. They have defined how the things should be and the world has followed….. For good or bad is open to debate….
One of the ideologies exported by them has been short term gains for long term pains…. This is especially visible from the current world economic crisis that originated in USA and now affecting rest of the world….
In 2001 America was overtaken by the dotcom mania and subsequently everyone in the world…. Billions were poured into dotcoms companies in the hope of excellent future earnings…..None came but what came due to the losses in the stocks was a recession… The US fed bank panicked and reduced lending rates to historic low of 1% and kept it there for a year…. Instead of taking the pains of the recession they chose to artificially stimulate the economy by pumping in cheap money for credit…
This money then flowed in to create the biggest ever property bubble of all time..
The lenders like banks had access to cheap money so they let go of their prudence in issuing loans and issued loans to any one who came under the definition of human being… Again none of these bankers thought of the consequences of such reckless lending…. Why bother… Just look for short term gains… From CEO of big investment firms to big fund managers everyone became part of this game…. Each one not looking beyond few months…. This is what Chuck Prince the former CEO of Citibank said just a few months before the credit crisis hit in Sep 2007…. “When the music stops, in terms of liquidity, things will be complicated. But as long as the music is playing, you’ve got to get up and dance. We’re still dancing.” Not dancing anymore are we Mr Prince…..
One would think that after this disaster Americans would have learnt their lessons.. But nah I guess its tough to get out of this way of thinking… Again instead of letting the markets correct themselves…. The US gov is trying to artificially stimulate it by printing money, lowering interest rates to zero, running record deficits… Short term measures will bring such long term consequences that America will be paying for generations…. To cure the effects of a hangover… Ones needs to stop drinking not drink more….. Similarly to correct the effects of taking on too much credit is to save not take more credit…
If they allow this recession to run its course by not trying anything… It will be painful but the consequence of bailing out failing companies and printing money would be disastrous in the long term….
One of the ideologies exported by them has been short term gains for long term pains…. This is especially visible from the current world economic crisis that originated in USA and now affecting rest of the world….
In 2001 America was overtaken by the dotcom mania and subsequently everyone in the world…. Billions were poured into dotcoms companies in the hope of excellent future earnings…..None came but what came due to the losses in the stocks was a recession… The US fed bank panicked and reduced lending rates to historic low of 1% and kept it there for a year…. Instead of taking the pains of the recession they chose to artificially stimulate the economy by pumping in cheap money for credit…
This money then flowed in to create the biggest ever property bubble of all time..
The lenders like banks had access to cheap money so they let go of their prudence in issuing loans and issued loans to any one who came under the definition of human being… Again none of these bankers thought of the consequences of such reckless lending…. Why bother… Just look for short term gains… From CEO of big investment firms to big fund managers everyone became part of this game…. Each one not looking beyond few months…. This is what Chuck Prince the former CEO of Citibank said just a few months before the credit crisis hit in Sep 2007…. “When the music stops, in terms of liquidity, things will be complicated. But as long as the music is playing, you’ve got to get up and dance. We’re still dancing.” Not dancing anymore are we Mr Prince…..
One would think that after this disaster Americans would have learnt their lessons.. But nah I guess its tough to get out of this way of thinking… Again instead of letting the markets correct themselves…. The US gov is trying to artificially stimulate it by printing money, lowering interest rates to zero, running record deficits… Short term measures will bring such long term consequences that America will be paying for generations…. To cure the effects of a hangover… Ones needs to stop drinking not drink more….. Similarly to correct the effects of taking on too much credit is to save not take more credit…
If they allow this recession to run its course by not trying anything… It will be painful but the consequence of bailing out failing companies and printing money would be disastrous in the long term….
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