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Green Shoots of Recovery?

Updated on June 11, 2011

International Economic Recovery

Billions of tax dollars and billons more in international currency went into bailing out the banking sector after falling into an almost complete melt down beginning with the demise of the Lehman brothers. Governments were faced with a very sticky wicket whether to allow more banks to fall or whether poring federal funds into what was seen by many as a bottomless pit. Many ordinary citizens were sympathetic and frown at the thought of their hard earned funds going into a system that is otherwise frothy towards them penalizing many poor citizen for a minor glitch in their banking agreement. Should anyone have shed tears or felt sorry for institutions important though they maybe to the world economy, but who have recklessness gambled and put us all at risk? The rising job losses, mortgage defaults and business closures are a testament to banking failures. The Obama bailout plans where criticized but while we disagree with such moves the economy was in meltdown and if the banking sector had gone down many more business would’ve gone, putting many more out of work and homes. The choice for a financial sector bailout was a hard one for a new administration which many feels should’ve been allowed to fail as they have only themselves to blame. Many analysts see the banking system with their reckless betting, and uncontrollable bonus culture at the heart of the problem facing the world. However if the banks had been allowed into free fall, it would be like a Molotov cocktail waiting to explode and no household around the world would be able to withstand the aftermath and would spark riots in many trouble spots.

Blame

The Russians point the finger at western democracy for the financial woes, America getting the biggest stick, echoed by Iran and many African governments. While there may be some truth in this arguments the world financial markets have been allowed to get too big without any international regulation. This beast was swallowing everything in its path and there had to be a correction, just sad so many innocent have been caught up in the downturn. Big well known names lenders in America who got into trouble because they were selling subprime mortgages on the international market to people who least could afford it. International markets bought into this causing widespread disruption in Europe with many high street banks folding and many more crippled by the effect. This was the root of the problem which brought the international money market to a standstill. So while many of us disapprove when our money was pumped in to help stabilise the market, it was seen as a wise move by financial analyst. Many question whether the Lehman Brothers should have been allowed to fold, which sent shockwave throughout the world banking sector, and sparking a run on banks in the UK and other European economies.

Green Shoots

The world is now focused on international monetary systems recovery with positive news coming out of Germany, Japan and France that their economies have brushed off the downturn and have entered positive territory. President Obama indicated a positive upturn in the US economy, referring to it as “green shoots of recovery” but cautioned against complacency, referring to it as fragile. Federal Reserve chairman Bernanke echoing European governments optimism, has said, “The worst US recession since the Great Depression was probably over”, but he also struck a note of caution saying, “the recovery would be slow and painful”. Many banks have indicated an increase in their profit margins, and have started paying back some of their bailout loans some have started high street lending again, but still many remain cautious. While there are many very positive signs in the UK economy, the housing sector has started to show positive signs, business and the retail sectors are showing positive signs, but the job market is still a worry. The sad thing for the UK government is an election is due in lees than a year, and behind in the polls cannot wait to see more positive signs in the economy.

Fragility

In situations like these it’s the poor who bear the brunt of the economic and financial pain. Many will still continue to fall behind with their mortgages, or lose their homes completely, while many more will be thrown out of work adding to an already bloated unemployment figure. Chairman Bernanke warned that US unemployment rate would top 10 per cent by the end of this year and would be very slow to come down. The unemployment rate reached 10.8 at the end of 1982 and many analysts are predicting it may be surpassed if the present trend continues. However, many are optimistic despite the obvious fragility still evident in the US economy, pointing to the continuing positive and almost stable territory of the stock market. With the improved financial position many banks have returned to the inflated bonus culture, rewarding many for carelessness, which had got us all into this mess in the fist place. It adds to the call led by Obama to curve such behaviour and put a cap on bonus payments. How much more can the system heaps on the poor, and how much longer will they continue to suffer at the hands of reckless bankers? If this bonus culture continues, and God forbid that another meltdown returns, would we be as willing to offer bailout? I think not!

Comments

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  • profile image

    Susette Robinson  

    8 years ago

    Thanks Kenny, It is finally here, may still not be visible to many but the fact that the banks are making profit again and paying out billions in compensations is evident things are looking up. The job ameket is still struggling but the holiday period shows inprove spending with big retailers revealing bumper profits.

  • Kenny MG profile imageAUTHOR

    MR Black 

    9 years ago from UK, Europe

    Major economies in europe reported they were out of recession, its about time America do too.

  • profile image

    Tony Jones 

    9 years ago

    The news today is positive for the American economy, which according to the news reports, has grown marginally in the last quarter

  • profile image

    Susette Robinson 

    9 years ago

    Very visionary of you kenny, the banking sector is showing sign of recovery so much so that the bonus culture which many blamed for causing the problem in the first place has returned.

  • Kenny MG profile imageAUTHOR

    MR Black 

    9 years ago from UK, Europe

    Sam, some how I hope too that many more people will see this inlight of the recent news that the US unemployment figures has has slowed

  • profile image

    Sam Drake 

    9 years ago

    It is definitely coming, though still fragile and although many jobs will still be lost, the rate is much slower now. Maybe because there is Christmas in the air, people are spending a little more in the shops

  • Kenny MG profile imageAUTHOR

    MR Black 

    9 years ago from UK, Europe

    Thomas I hope this continue to be the case although many jobs continued to be lost, it seems the rate is slowing and there are more hope in our towns and cities.

  • profile image

    Thomas Royale 

    9 years ago

    I beleive there is truly a sign of recovery however fragile it may be at this time. The full effect will not be felt by the majority until middle to late 2010

  • Kenny MG profile imageAUTHOR

    MR Black 

    9 years ago from UK, Europe

    Thanks for that Joan, through the annals of human history the rich always seems to get better while the poor gets worse. Not until Christ returns will there be adequate distribution of wealth

  • profile image

    Joan 

    9 years ago

    The poor are always the ones who seem to get the raw end of the deal. Even with what is happening in the economy the rich seem to be spending more while the poor suffers. I am hoping for the best however as we climb our of the recession....hard and careful climb.

  • Kenny MG profile imageAUTHOR

    MR Black 

    9 years ago from UK, Europe

    Well the banks are reporting bumper profits that even the bonus culture is returning. Painful when you hear it but its a sign things are getting better

  • profile image

    Samantha Drake 

    9 years ago

    The jury is still out on this one as many continue to lose their jobs. Its ok for the banks but it will take some time before the rest of us see and feel it.

  • profile image

    Jerry Jones 

    9 years ago

    There is some positivity in the shops

  • Kenny MG profile imageAUTHOR

    MR Black 

    9 years ago from UK, Europe

    If this bonus culture continues, and God forbid that another meltdown returns, would we be as willing to offer bailout? I think not!

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