Banks, Financial Crisis and Capitalism
I was reading recently an article regarding the imminent bankrupcy of the emerging markets (especially the ones from Eastern Europe). The author said in his investment blog that banks are now forcing up the interest rates in those countries. The increase in the interest rates would lead to a wave of personal bankrupcies in those markets, allowing the foreign investors to buy the local assets (especially the real estate assets from those emerging markets) very cheap. The scenario would be unfolding as we speak, whilst the peak of the crisis in the Eastewrn Europe should arrive somewhere in the middle of 2010.
The fallacies of this story are many. I will not enter into the details of the cosnpiration theory which seems to hide behind this pessimistic approach to the Eastern Europe economies. I will also not discuss here the fact that it is hard for the big banks to cooperate among them. Or the bank cooperating with the big investment funds, their competitors, would be a highly unlike - ier scenario. I will just mention the recent lessons that Dubai and Greece, two sovereign countries, whose recent developments are linked tot tourism and real estate investmentst, taught us.
This piece of news is interesting not because it would impact on any investment strategy…but rather because we are in July 209 and the subprime crisis still haunts the US Treasury. The US government was simply forced to bail out one more bank - this time the smaller CIT bank was impacted.
The International Monetary Fund (IMF) has recently published a comprehensive report called “Global Financial Stability Report - Responding to the Financial Crisis and Measuring the Systemic Risk.”. The IMF paper covers the history of the recent global financial crisis, as well as the measures taken by the governments and the companies to fight against it.
Here we go again with one more doitinvest.com survey on how long might still last the current financial crisis / recession. Compared to the last two surveys we had a couple of months ago, this one seems to be pretty more optimistic. This optimism is fueled by the recent slow recovery of the stock markets (see the Dow Jones recovering sharply in the last two weeks), as well as by the pace of the bad news pouring in at a slower pace.
The International Monetary Fund issued today a statement by which it encouraged the Eastern European countries to adopt Euro as thei currency, in order to avoid the further effects of the financial crisis. An article published in Financial Times today mentioned that:
Well, sounds good, right? Too bad it is just a website fuill of advice on how to survive the financial crisis 
Sometimes I can’t stop wondering. First of all, AIG decided to pay bonuses to its executives for about $160 million. Of course, the cash came from the roughly $90 billion government help to the worldwide linked insurer to survive until toady, in a move which was very much debated. Since AIG showed that its fall would trigger a domino collapse of the global financial system, it looks now like the government had little choice about it. And so it did.
Let’s say that the trillion or so of toxic assets would face two choices - go bankrupt or be offered for free to willing persons. What should the U.S. government do?
The recent financial crisis has some interesting effects too. As you are just reading this investment blog, a thief could use somewhere in the world a counterfeit credit card with your full name printed on it.