Are you worried today that you are not living as well as you once did? That your monthly pay can no longer sustain your bills? That the company you have worked for many years may dump you? That you are in the bottom rung of the economic ladder? That you may never see a middle class lifestyle? Or if you are a single parent, or part of a young working family, you will never be able to save enough to buy a home? That you are paying more than your fair share of taxes? And most pressing, that the people who should represent you in government are taking care of themselves at your expense?
These are the worrying questions that a majority of citizens are grappling with on a daily basis. To most of them, the current crisis is one that many do not really understand the root cause. As days unfold, no one seems to be sure if the situation will get better or worse. One sad reality about the crisis is that it is global in nature. Its impact is being felt in both small economies as ours, large ones as
At a recent meeting by the not so old G20 Economies, it was almost certain that the origin of the current mess is attributed to the
A person deprived of oxygen will turn blue, collapse and eventually die. Consequently, deprive economies of credit and a similar process kicks in. As the financial crisis has broadened and intensified, the global economy has began to suffocate.
And according to the latest economic outlook from the IMF, a major downturn seems inevitable as the world seems to be in the most dangerous ‘shock’ since the 1930’s. The question then arises, where was the IMF when signs that all was not well started trickling into the market? This year’s failures are not the first in the corporate scene. Remember the Enron and the Worldcom collapse with so much of shareholder funds? Unlike then however, the magnitude of the collapse is huge at the moment. Remember Bear and Stearns, Lehman Brothers, Merrill Lynch, Citi and a couple of other financial institutions that are still in trouble and expect big bailouts from the federal reserve?
The basic fact is, when these markets are drained off the liquidity they need, it means that they cannot lend and investors funds are jeopardized. Global growth measured by the purchasing power parity (ppp) basis is set to come down in next year. The
A more worrying question on everyone’s mind is, what really went wrong? And to answer that, remember the
I strongly believe that the current situation is a making of the
The harder challenge at the moment is that of monetary policy, that is, balancing the risk of inflation and the risk of a deeper downturn. Inflation seems to be our greatest undoing. We therefore need to raise interest rates and cut deficits. That way, we will restore confidence and thereby the economy.
By Michael Musau
CEO Emerging Africa Capital
Licenced by The Capital Markets Authority (CMA)