How bad is the econ­omy?

Enterprise - - Contents -

Three years into the global fi­nan­cial cri­sis and the eco­nomic so­lu­tions still ap­pear vague. Ac­cord­ing to econ­o­mists, there are in­di­ca­tions of a huge con­trac­tion in pri­vate credit. No one is mak­ing enough loans and in­vest­ments to ex­pand or start busi­nesses and get the econ­omy grow­ing. There are sto­ries of bad debts, shaky banks, floun­der­ing busi­nesses, peo­ple los­ing their homes, ris­ing un­em­ploy­ment and cur­rency wars, but the cor­rect rea­sons of the causes still re­main an enigma.

The ma­jor rea­son for this un­cer­tainty is the ab­sence of cor­rect facts and num­bers. An­a­lysts ask many ques­tions, like how can any­one be com­fort­able ex­tend­ing loans if bal­ance sheets do not sig­nal all the facts? How can those who hold the as­sets and the risks can­not be lo­cated eas­ily? How do you know which banks and coun­tries are sol­vent, if you can­not de­ter­mine how many toxic as­sets they hold if the le­gal own­ers of mort­gages can’t be found? If banks can’t clear their books be­cause courts con­tinue to stop fore­clo­sures be­cause titling is un­clear, if there is lit­tle in­for­ma­tion on whether those who claim they can cover risk de­faults have the as­sets to do so?

Due to this di­min­ish­ing knowl­edge, the econ­omy is said to be in a not-so-usual fi­nan­cial cri­sis. As in the ab­sence of num­bers, the mar­kets can­not be trusted. There­fore, in or­der to as­sess how bad things re­ally are, de­pends on which part of the world is be­ing re­ferred to. The world feels par­tic­u­larly un­pre­dictable be­cause what is por­trayed as a fi­nan­cial cri­sis in Frank­furt and New York is, at a deeper level, a cri­sis of tran­si­tion. Con­fi­dence has drained out from the part of the world that is used to run­ning the world, as there is un­cer­tainty over what new prin­ci­ples should be em­braced

Newspapers in English

Newspapers from Pakistan

© PressReader. All rights reserved.