Ah! Some hope finally

And finally there is some light seen at the end of the tunnel. The US Financial crises isn't over yet. Neither can any academician, policy maker nor business man control the turn of events in next few weeks or perhaps months . However, it is now widely accepted that a long term stagflation is ahead like that happened in Japan during the last decade of 20th century.

The DOW nosedived 21% last week, just after the $700b bill was hurried and approved by the US congress. What does this mean? Are the policy makers not in control of the economy? Most likely so!

I was catching up with a good load of literature on this financial crises . INSEAD Business School's Prof.Ilian Mihov's article "US economy may plunge into depression if banking sector bailout fails", elobortes how policy decisions that are poorly administered can create havoc.

The Brilliant article " How to Fix the U.S. Financial Crisis "in SCIAM, by Prof. Jeffery Sachs was the best I read. He argues that first Fed should prevent any collapse of working capital by making banks supply short-term loans, and also see that bank lending is not squeezed.

He also suggest two additional steps- (a) to ease the repayment terms to existing mortgage owners (b) to get back to fiscal and monitory policy to encourage the spending in Asia, so that the decline in U.S. consumer spending is smoothly offset by a rise in spending in other countries.

This 21st century crises brings out how closely the world economy is integrated, and an 'economic tsunami' hitting US can send its ripples not just to London but across the seas to shores of Bombay too.

Clearly the Policy makers have failed to recognize their failure. And the confidence in markets will not improve until this is acknowledged. More significantly there is something for the man in main street to understand in this 21st Century- only smart ones survives not necessarily the big ones nor the fittest ! And this is the century of 'Survival of the Smartest'