Bailout and Stimulus for the Mind.

Saturday, August 22, 2009

For quite sometime I wanted to write a blog on this topic. But my views were not making any headway; were always fading away from clarity, often getting confused at the unfolding scenario of recession that engulfed the globe. The financial crisis that started the destruction soon assumed a global power decimating the intelligent minds. It looked as if there was no solution and the mind itself required a ‘Bailout and Stimulus’.

I strongly felt that the solution was embedded in the mind and was in need of the right key. The starting point was to sit, analyse ant put the mind to work. In my view, that would be the Stimulus.

I mustered all my thoughts and started stimulating. Here I go.

What follows a crisis is invariably a knee-jerk reaction. Thereafter, the fall out results in leaders taking measures to solve and wriggle out of the crisis. They name the measures with words that keep resonating, and such words buzz around as if they are the panacea for solving such crisis.

The financial meltdown that crippled the economy in USA, and crippled the economies of other countries one by one, required urgent measures to freeze the meltdown. That’s when the words “Bail-out” and “Stimulus” came out of the lexicon.

Bailing out is fine when some one is in distress. But is it prudent if an industry in the economy slips into a crisis by its own reckless performance and is bailed out by the government? That becomes debatable in a free market economy where there is not much control by the state excepting the regulatory bodies monitoring industry performance.

The crisis in the financial sector was not confined to that sector alone, but spread ominously to other sectors of American economy and across the world. Whatever the type of economies the other countries were pursuing, they were simply swallowed plunging the globe into gloom.

In such a situation, who will bail out whom, and where should the stimulation start? Obviously it should begin in the USA from where the crisis emanated, and am glad it did. Only the government in power has a moral responsibility to revive its country’s economy with slew of measures. None in the private sector would work for the country’s economy on its own. This is a reality to be taken with a pinch of salt. The Government has to intervene, and needs to give directions through rules and regulations. Whatever may be the type of economy, whatever may be the type of governance, all activities need to be governed by rules, and monitored by regulatory bodies. All of us have seen the results of violating these rules and failure of the regulatory bodies. That is sad and unfortunate.

It was appropriate that President Barack Obama’s administration took the initiative. The critics of the stimulus package, whether they are media, from GOP, from within the Democratic Party have little substance in their criticism. What is the alternative?

Critics may argue that the stimulus plan may be small. It ought to be like that. You treat a patient with appropriate dosages of medicine; watch for the response and resuscitate the patient gradually, and put him on the road to recovery. That’s how things work.

Amidst this, those responsible for triggering this collapse seem to get away. Are they? Investigations would be made and trials would certainly follow, if the government is sincere. Let us hope it will. For a second, just ponder. Have not the Banks, the financial institutions exploited our psyche of greed? We allowed them. We tried to live beyond our means. We are equally at fault for the financial mess.

Now is the time to introspect. It is time to change our habits and our mind set too. It is a sign of immaturity and smallness of our minds if we expect government alone to set things right. As citizens, we need to co-operate and also act as watchdogs.

Finance is the backbone of any economy. The finance industry must be strengthened so that finance is available to the firms, and the fiscal stimulus would only create and lift demand. The starting point for obtaining Finance is at the banks. Their functions need to be streamlined and strictly monitored.

Nationalization of the Banks is an option resorted to by the Government to control flow of money into the economy, and monitor the function of the banks through which it reaches out to people. The capitalism fears that this measure is an intrusion into its system and an affront to its ethos. But Capitalism failed this time to stem the rot.

Economists, Financial analysts continue to say there are no signs of the recovery. Yet, economy is moving at a snails pace, and has not totally collapsed. In my opinion, recession is deeply embedded in our minds, and we need to develop the habit of being frugal in our lifestyle and curb our temptations of becoming greedy. It is true that life is there to be enjoyed, but within means of affordability.

Tailpiece: If we do not bailout our thoughts and stimulate our minds, we will all end up as Nero’s while our Nations get burnt.