Rewind to 1991

In 1991, India was on the brink of defaulting on external paymentss, forcing the then PM and the then FM to pawn Gold with Switzeland to raise cash. The IMF, driven by the likes of the US, was quick to jump in , to prescribe the panacea for the ills faced, and say " stop privatizing profits and nationalizing lossses, and open up the Public Sector Undertakings to the Pvt. Sector". Sure enough India trudged along that path, and many other countries followed suit.


Fast forward to 2008. Today's news is that the U.S Treasury Secretary Henry Paulson is considering setting up a government facility to take on bad debts from financial institutions and prevent the global credit crisis from worsening. In other words, the mesage for the big guns in the Corporae Sector is - go and commit hara-kiri, come out with "innovative" Financial instruments like "structured products" and , if things go awry, dont worry, I , like God, will take all the crap created". The Wall Street shenanigans are on the rampage, the Govt is soaking up all the foul bets, and we all watch in amusement and awe.

The estimation as of yesterday is that the cost of bail-outs so far ( NOT including this new initiative" ) is about $900B ( Lehman Bros, Bear, Fannie, Freddie etc etc etc..) . And how will the Govt. fund this? Possibly a combination of the following:

1. Raise additional Govt. Bonds. I wonder who will buy them now.
2. Simply print more money - will be catastrophic as far as Inflation and US $ value is concerned, especially considering that the US wants to adopt a Strong Dollar policy.
3. Raise taxes - something Obama has said he would, and McCain has said No.
4. Cut down on infrastructure and public spending - will be disastrous for the long term future of the US.

Whichever way I look at it, the man on the streets is going to be impacted. The biggest story of the US ssuccess model is that it has made the average American more prosperous economically, than he was 50 years ago. True enough. But , to me, that very premise on which the US brand of Capitalism is under siege now, as these events will tell us.

I still do not believe that the US will go down the tube. It is a nation with fantastic human resources. But I strongly feel that the heydays of Yankee hegemony are well and truly over, and that we are undergoing a fundamental paradigm shift, where the world order is about to change permenantly. I am happy to be proven wrong here.