Are We Seeing A Repeat Of 1929?

Aided by major advances in Information Technology,the GDP’s of the United States and other countries has risen dramatically during the 1990′s and into the current century. Economic and financial advances and declines are of course cyclical yet few experts or analysts in the global market place anticipated the rapid financial meltdowns we have witnessed in recent weeks and months, the steepest decline since 1929.

The somewhat grim financial situation we now find ourselves in indicates a strong need to redefine existing economic and financial models. It is too early to tell when or whether financial rescue packages recently put in place will turn the economies of the USA, Europe and Asia around. Initially these bailout packages have done little to stop the slide in stock indexes.

It seems strange that the collapse of several major financial institutions such as Lehman Brothers came as such a surprise. Hindsite shows that there were plenty of danger signals which if heeded may have prevented this major problem. The business model of Lehman Brothers, their lending practices, and their operating practices, if attended to and revised at an earlier time may have saved the company and kept employees and shareholders holding a bag containing precious little.

We have to ask, how many other financial institutions face the same fate and what financial help to retool their business models. What is it that needs to be done to enable our economies to get back on track and experience a solid and sustainable growth rate once again. Even the G7 has yet to find the answer to this dilemma.

The US and China have been working together to attempt to get tings turned around with perhaps some success. However, even if these to major economic powers experience some success in achieving a recovery, the other Asian and the European countries have to be fully involved in the process.

The practice of instituting financial rescue or bailout packages begs the question as to how long and at what cost will financial institutions and economies be able to withstand the pressure leading to future debacles. While the financial situation is under repair the investor has to review is or her own patterns of investment to determine how, from this time forward, to gain a sustainable growth rate.

The small investor having been burned by the recent slide will no doubt be very cautious as to when and where to invest any additional money. And well he should be until the political leaders of the countries most involved get together and put in place practices designed not only to reverse the current situation to prevent it from happening again.

All to often when we read the news about the plunging stock market we may feel unaffected unless we ourselves are players in the market. What is not always so apparent is the slowdown in the economy, noticeable loss of jobs and lowering of wages resulting from loss of share values. The average citizen needs to be aware of the effects of what is going on in the marketplace on his or her own well being. The road to recovery isn’t just about saving major financial institutions but also about educating the average citizen about what this all can mean to him or her.

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