The International Finance Sector, particularly the Banks and mortgage lenders, is facing its worst crisis ever. Basically the sector has been lending money to people who simply could not afford to pay back the loan(s). More like Robert Gabriel Mugabe borrowing right, left and centre and spending as if there is no tomorrow when the money will be repaid with interest.
The “Spending Mugabes” were from most nations in the West but mainly from the USA. But because most of the financial institutions dealing in these dodgy big spenders sold some of these portfolio to other financial institutions all over the West- the whole sector in the West has been affected.
Whilst the “going” was the Banks, Mortgage Lenders, etc. made a killing. But when some of the borrowers started to default, the whole shooting match collapsed like a house of cards. Many of the institutions were able to absorb the dab loans out of the large past profits. There were others, however, who could not because the bad debt constituted a significant part of their business. There is always the sucker left holding the bag!
When word gets round that a particular Bank or Building Society is one such sucker: the shareholder and account holders flock to sell their shares or withdraw their money. Naturally they do not want to be the ones left holding the bag. A “run” on a Bank would force it out of business in no time. The “run” could easily to other Banks and soon the whole financial system would collapse.
Day to day life in this modern age can not function without the financial sectors; it is a critical component of our industrialised world. Western governments have stepped in with taxpayers’ money to bail out the financial sector. The bailout provided ready cash for account holders who wished to withdraw their money and to assure those who do not withdraw their money the guarantee that the government itself will repay the money if the Bank was to become bankrupt.
The American government is proposing a bail of US$ 700 billion for its financial institutions. The rest of Western countries are proposing a similar package for their financial institutions. To put it into some perspective; Zimbabwe will need US$ 1 billion, according to some experts, over a five year period to put back its economy back on track! So the Western governments’ bailouts are not small fries!
The American government has been debating the bailout all week. The two American presidential candidates have had to cut short their campaigning to go back to Washington to take part in the debate. In contrast Zimbabwe has had no effective government now since February and the economy is in total melt down and yet both Mugabe and Tsvangirai have been globe-trotting at every opportunity.
“There will be a time to punish those who set this fire, but now is the moment for us to come together and put the fire out” said Barack Obama.
In Zimbabwe we all know exactly who set the country on fire- he has done so publicly and continues to brandish the smouldering log and threaten to burn down the little that is left. To appease him, we give him all the power and authority in the vain hope he will put out the fire!
The financial bailouts the West is paying out will make them even less generous than ever. Right now Zimbabwe will need millions in aid to buy food. The whole world knows the barbaric farm invasions of the last eight years is the root cause of Zimbabwe’s food shortages. And 35 new farms were seized since the signing of the deal to form a GNU; yet none of the leaders have said a thing.
It is hard to see how the world can be expected to take Zimbabwe’s teething problems seriously when we are not serious about anything ourselves!
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