Here's the joke. Had the US financial system be tighter in boom years, the global economy will not be weary today. Is it a lack of governance or the ruins of democratic financial system, in the US that created such a huge mess today?
The Denial
To think that the current financial turmoil started from their mishandling, they are still out holding their might to teach the global financial heads how to better manage global financial controls. Their leaders are not admiting to the problem and in denial claiming IMF is "Unduly pessimistic" about the US Economy. They are more focus on war in Iraq it appears, or the outgoing Administration are worry of a bad legacy.
Financial System & Controls
When banks starts getting overly aggressive and optimistic, we have to get cautious. The other joke about banks is, "they'll lend you and umbrella during sunny days, and take it back during rainy days".
In Singapore, banks tends to be conservative. Larger loans are usually subjected to strong collateral, such as properties. However, banks are stringent in lending beyond 80% Loan To Valuation as this expose them to greater risk that if the borrower defaults on payment, they may not be able to recover their loan.
With such controls, the financial institutions are limiting their risk.
Borrowers Personal Responsibility
Borrowers should learn to understand more about the economy and interest rate patterns to avoid over commiting into a loan they will have problem servicing later. This may be hard as some are overly naive and created false expectation of themselves and their potentials.
Let us not forget the lesson learnt since the Asian Financial Crisis to the most current Global Financial Crisis. We have to embrace these valuable lessons to avoid being trapped. The governments have too much to be concern about than to be responsible for our financial education.
US will work with partners to avert future crisis: Paulson
WASHINGTON (AFP) - - US Treasury Secretary Henry Paulson warned Friday that the struggling US economy may face rougher times ahead but insisted its fundamental prospects are in good shape.
The Treasury chief also said Washington would work with its global partners to take steps aimed at averting future financial crises.
"The financial market turmoil and its impact on global growth underscore the need for all countries to remain open to trade and investment," Paulson said after a meeting here of finance ministers and officials from the Group of Seven major industrialized countries.
"We have worked, and will continue to work, closely to address global challenges and take concrete actions," Paulson said.
G7 officials endorsed a plan earlier Friday aimed at preventing a repetition of the recent financial market turmoil which has caused tens of billions of dollars of losses for major banks and securities firms.
"There may be more bumps in the road" for the US economy, Paulson cautioned.
The current slowdown in the world's biggest economy has been called a recession by the International Monetary Fund, an assessment dismissed by President George W. Bush's administration as "unduly pessimistic."
But it is clear that a persistent US housing slump and a related credit crunch have slowed US economic growth dramatically in recent months.
"I am confident in the long-term economic prospects of the United States," Paulson said. "However, the housing correction, together with high energy prices and financial market turmoil are weighing on US economic growth."
Paulson, a former chief executive of Goldman Sachs, said the US economy would likely get out of a first-quarter rut by later this year and possibly as early as the second quarter.
"The first quarter was a tough quarter," he told journalists at a press briefing.
A growing number of economists believe America's economy has already slipped into a recession.
Bush administration officials say a flurry of Federal Reserve interest-rate cuts and a giant 168-billion-dollar economic stimulus package should revive growth in coming months.
Paulson said the economy could benefit from "positive results" as early as the second quarter as it continues to weather stressed housing and credit markets.
He said some media headlines on the economy appeared to be overly bleak and stressed that America's economy is broad-based and dynamic.
Addressing reporters' questions about the foreign exchange markets and the weakened dollar, Paulson said G7 officials always debate currencies.
"I reiterated in very strong terms our commitment to a strong dollar," he said of his participation in the G7 finance meeting, adding that ministers also discussed other global currencies and their values.
The US dollar has weakened markedly on foreign exchange markets in recent months, partly due to aggressive Fed rate cuts.
Paulson also reiterated calls for Beijing to increase the flexibility of its yuan currency.
"As someone who has just got back from China, I believe that China understands ... it's in their interests, as they're are dealing with some of the issues they have ... to have a currency that's more reflective of underlying economic fundamentals," he said.
Some US economic commentators accuse China of keeping its currency artificially undervalued to support China's ballooning trade surplus with the United States.
(Source : http://sg.news.yahoo.com/afp/20080412/tts-g7-imf-worldbank-economy-statement-u-972e412.html)
When problem brews, the weak blames others.
G7 finance chiefs back financial reforms amid crisis
WASHINGTON (AFP) - - The Group of Seven warned Friday the global economy is sputtering and vigorously backed measures to prevent a recurrence of what is being called the worst financial crisis in seven decades.
Finance ministers and central bank governors of the G7 major industrialized countries said banks should adopt steps to "fully and promptly" reveal their risk exposure due to the current financial market turmoil within 100 days.
The world economy "continues to face a difficult period ... (and) near-term economic prospects have weakened," the G7 officials said in a statement after their meeting here.
The finance chiefs from Britain, Canada, France, Germany, Italy, Japan and the United States stared into the abyss of a complex crisis that began in the US subprime home-loan market in August and has spread into a global credit squeeze draining world growth.
"The turmoil in global financial markets remains challenging and more protracted than we had anticipated," they said ahead of the weekend meetings here of the board of governors of the International Monetary Fund and World Bank.
"While economic conditions differ in our countries, downside risks to the outlook persist in view of the ongoing weakness in US residential housing markets, stressed global financial market conditions, the international impact of high oil and commodity prices, and consequent inflation pressures."
The G7 finance chiefs also noted that since their last meeting in February, there have been "sharp fluctuations" in major currencies and members "continue to monitor exchange markets closely and cooperate as appropriate."
Major central banks have coordinated multi-billion dollar cash injections into stressed financial markets in recent months and the dollar has plunged to record lows.
In response to the spreading crisis, they said they approved a Financial Stability Forum (FSF) report on ways to prevent a repetition and had identified several recommendations for implementation "within the next 100 days."
"Rapid implementation of the FSF report will not only enhance the resilience of the global financial system for the longer term but should help to support confidence and improve the functioning of the markets," they said.
Ranked first, "firms should fully and promptly disclose their risk exposures, write-downs, and fair value estimates for complex and illiquid instruments.
"We strongly encourage financial institutions to make robust risk disclosures in their upcoming mid-year reporting consistent with leading disclosure practices as set out in the FSF's report."
Among other measures for early implementation, the G7 said the International Accounting Standards Board (IASB) and standard-setters should "initiate urgent action to improve the accounting and disclosure standards for off-balance sheet entities."
It should also enhance its guidance on fair value accounting, particularly on valuing financial instruments in periods of stress.
Off-balance sheet entities have been blamed for concealing the true extent of the banks' exposure to the US high-risk subprime mortgage crisis and the risks involved in assets that could not be fairly valued in times of distress.
In its report, the FSF said watchdogs around the world should improve their "responsiveness to risks," and "robust arrangements" should be put in place to deal with stress in the global financial system.
"To restore confidence in the soundness of markets and instutitions, it is essential that steps are taken now to enhance the resilience of the global system," the FSF urged.
The G7 ministers reaffirmed "our strong commitment to continue working closely together to restore sustained growth, maintain price stability, and ensure the smooth and orderly functioning of our financial systems."
US Treasury Secretary Henry Paulson, his country at the epicenter of the crisis, said: "We have worked, and will continue to work, closely to address global challenges and take concrete actions".
(source : http://sg.news.yahoo.com/afp/20080412/tts-g7-imf-worldbank-economy-c1b2fc3.html)
Subscribe to:
Post Comments (Atom)
No comments:
Post a Comment