The world is seeing a Big Bang in the financial world! How no other word other than Big Bang is better suited to describe the situation, will be clear once we foresee the aftermath of this global financial crises.
The world has seen far worse financial crises before. The great parallel to current financial situation can be that of 1930, great depression; but 1930 affected only the Western World, mostly the Northern America. The world then was not so much financially integrated and many sophisticated know-how of financial/technological issue did not exist then.
The current situation is all together different. With the advent of technology, we could in a fraction of a second know inflows and outflows of currency from continent to continent, let alone from large financial institutions. This is only to state how we are different from 1930s.
So what will be the outcome of this great turmoil? The financial world will re-learn very basic rules of economics, the way how Big Bang resulted in creation of the universe with a very chaotic beginning and finally shaping into our world with full of life.
May be more than 3000 year old economic system was only trying to reach this level finally result in a Big Bang what we are seeing today and hopefully finally settle into a more stable form of a system. There will be a very good outcome of the situation. In the future there will economic transaction which could be greatly regulated and will be thoroughly scrutinized by the parties involved.
Situation like subprime, which is like defying rules of gravity in the physical world, may not be arising. The populist measures of governments will be within the basic rules of economics. The system will be made far more transparent and probably regulators will be in action before any unscrupulous financial product gains strength and erupts into a giant economic crisis.
The great advantage of 21st century is interconnectedness through Internet, which will be made to use to the best possible extent and will alert regulatory bodies in advance if the system is going in the wrong direction.
Hopefully whatever outcome from the current situation will make the system more efficient. There may not be any more Big Bang soon in the financial world in the near future and many Big Bangs in one’s lifetime may not be good for the economy and the world!
hemanth26@hotmail.com
Saturday, November 1, 2008
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