Friday, October 10, 2008 Editorials: Beleaguered global economy
THERE is no doubting the fact that the most vital concern of the nations of the world right now is economic stability.
Somehow, reports by the media are about the looming economic instability of the world’s economy generated by the financial crisis in the United States.
Passage by the US Congress of the $700 billion bailout fund did not seem to ease the problem, and lessen the global threat.
It has instead given impetus to the emergence of more economic problems than nations less developed and less capable of tackling issues of economic survival can accommodate.
Bankruptcy
Iceland, a nation of some 320,000 people located near the Arctic Circle, is reportedly “on the brink of becoming the first (to declare) ‘national bankruptcy’ of the global financial meltdown.”
The volcanic island has a “formidable international reach because of an outsized banking sector that set out with Viking confidence to conquer swaths of the British economy.”
However, with its top four banks owing $100 billion in foreign debt, the Icelanders are now “watching helplessly as their economy implodes—their currency losing almost its value, and their heavily exposed banks collapsing under the weight of debts.”
This may have a tremendous implication on the economic stability of many nations, including but to a lesser degree, the Asian countries.
This is especially true in Europe, “given the heavy investments by Icelandic banks and companies across the continent.”
In fact, to contain the crisis, its government has resorted to nationalizing of banks under laws that also allow the take over companies.
Reforms
Reports said that the global stock markets took a dive the other day “with its worst fall in more than 20 years.”
In the domestic scene, the peso slipped to a 17-month low in intra-day trading at P47.81 to the dollar.
That there is need for urgent reforms in the global financial architecture, including tighter regulations on housing markets and on the use of sophisticated financial instruments to better deal with the worsening global credit crunch was pointed to by a former chief of the International Monetary Fund.
But he assured that while the United States could slip into recession, it’s not likely globally due to constant Asian growth.
