Views Collection

What particular measures could be initiated to fight the current credit crunch seen in the west? Every capitalism theory has gone wrong and no economist had ever had the slightest of ideas of this credit crunch, in fact this kind of crisis is always uncertain. Many employees have lost their jobs, the biggest motor companies and even banks too; they are on the verge of bankruptcy. Is it the possible aftermath of 9-11? In some way, we can point that particular incidence responsible for today’s credit crisis. Did America choose the wrong policy of war? Is the wealthiest nation in the world heading back to the primitives? Many other nations of the world are sheltered under America’s finance and policies and would it be the sole reason which is responsible for poor nations being the hardest hit? So what now, what are the precautionary steps which should be initiated at immediate to deal with the crisis?

To a simple understanding of my alike, this may have occurred due to the excessive allowance of credit facility. A barter system would have done better rather than granting credit facilities. The investors invested huge sum of money in building real estates and sold them. The sale did not and does not generate instant cash but the payment is released in installments, probably 10 percent of the total sum in a single payment. But while purchasing the raw materials, man powers and etc. the contractors of the investors would have definitely paid them in hard cash but the payback is not received in a lump sum amount. And the investment which has been done in hard cash seems to have lost. Calculating the rate of return, profit margin, time factor and all, the return would seem to be way under par, however the retailers and sellers would have certainly added all these costs beforehand.

But the question is where the invested cash is? To get the entire invested sum back, the time limit is undefined and thus the investor seems to have cash in hand but it’s only on papers. If the investors needed additional sum of money to invest elsewhere, they would lack hard cash.

And now to deal with the credit crisis, my opinion is to save less and spend generously. Saving is good but excessive saving is not good. “Saving is a vice, not a virtue” economists say so. If everyone started saving few and spend the rest lavishly, it would definitely help the global economy to boom. Fearing the current credit crisis, many people could have been saving money expecting the situation to worsen, which is not a good practice at all. Just spend everything you have and save a little for the possible worst consequences.

If the largest motor manufacturing companies sell automobiles at a cheaper rate and every buyer bought them without any hesitance, cash would start flowing which would eventually take care of the financial crisis.

This is my personal analysis and would definitely love to be corrected, if my assumptions are wrong. Comments are heartily welcomed.