FindingFinancialSolutions

Presently in the USA a man called Hank Paulson has possibly the most influential job in the world. He is the man putting together the plans to bail out the economy of his country, and from there, we all hope, that of the world.

The first step, already stage managed by his boss, President Bush, was to restore some faith in the system. This was achieved, simply, by showing some true grit in the face of the oncoming storm. Letting the global economy know that America was determined to act in economic self- defense was the first, vital step in saving our collective fall over the precipice into a financial void.

I was talking to an economist and she said something very wise to me, to the effect that any measure at any cost was better than the disaster we were about to suffer. I believe she was right, but as I said to her, there would be a cost, but none of us can know how huge it might be.

Hank Paulson is not a well-known figure, and he is under enormous pressure to do this impossible job and get it right. However like the curate’s egg, it’s likely that the result will be good in parts. The inevitable consequence of the last few weeks and months is that aspects of laissez faire capitalism will never be the same again, and maybe that’s just as it should be.

However, with the back door, but essential nationalization of Northern Rock in the UK and Freddie Mac, Fannie Mae and AIG in the USA, the re-alignment of big banking and the federal plan to buy non performing or toxic debts we face a very different future. The government of the USA now owns more than half of all mortgages in the USA. In the UK we used to call such a scenario “socialism: red in tooth and claw”. It’s hard to imagine that America is now in this situation.

At the Labour Party conference in the UK there are calls for the re-nationalization of the formerly publicly owned energy utility companies and a well received call for more legislation and regulation of the City institutions considered guilty, via their short term greed, of getting us all into this financial mess. It begins to sound like the bad old days that preceded New Labour, and supporters should remember, their Party was unelectable.

In the USA the Democratic party were holding up the necessary legislation so that the details of the financial bailout could be better considered. This could be a huge political error however right they might be within the context of the tactical details. The global community, especially the financial section of it, demands immediate action, and won’t understand or sympathize with anything that holds this up. The market in the States almost immediately crashed in reaction and the dollar plummeted against a basket of currencies. This is not the time for politics as normal!