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Japan now is the safety officer for global financial meltdown
Japan has a very huge advantages towards global economic downturn nowadays. Since it has a very solid capital in every banks. With its $5 trillion economy and store of cash rich banks, Japan had initially appeared comparatively unscathed from the credit crisis swiftly gathering pace across the United States and Europe. While America and Britain still struggling to secure all their financial institutions, I seems that japan is untouchable in today`s global financial meltdown. In fact, japan is now offering to help any other countries who really suffer due to this crisis.
The British and American plans, though far from identical, have two common elements according to officials: injection of government money into banks in return for ownership stakes and guarantees of repayment for various types of loans. Both remedies will be center stage on Saturday, when President Bush meets with finance ministers from the world’s richest countries at an unusual White House meeting to swap ideas. Mr. Bush’s invitation to finance ministers from Britain, Italy, Germany, France, Canada and Japan came on a day of phone calls and letters between European leaders and with Washington. Adding to the urgency, the Japanese stock market plunged more than 10 percent Friday morning, after having dropped 9 percent on Wednesday.
U.S. action so far is unprecedented in scale since the Great Depression. In the past five weeks alone, the government has taken over mortgage-finance firms Fannie Mae and Freddie Mac, rescued insurer American International Group Inc., backed the deposits of money-market funds and authorized a $700 billion bank rescue program. In putting together those measures, policy makers stretched the limits of what they can do under the law. The Fed has repeatedly invoked emergency powers only available to it at times of ``unusual and exigent circumstances'' to extend credit of up to $123.8 billion to AIG and set up its commercial-paper program.
And U.S. policy makers aren't finished yet. Paulson yesterday signaled he's considering pumping capital into U.S. financial institutions, saying ``we will use all of the tools we've been given to maximum effectiveness'' under the $700 billion Troubled Asset Relief Program. Barclays Capital Inc., Macroeconomic Advisers LLC and other forecasters predict the Fed will cut rates by another half-point this month to 1 percent. That would match the lowest level in five decades.
"Policy makers want to get as much stimulus into the system as soon as possible,'' said Brian Sack, a former Fed economist now at Macroeconomic Advisers in Washington.
Yet for all these efforts, investors remain unnerved and financial markets are in turmoil. U.S. stock indexes fell for a sixth day yesterday, plummeting 16 percent in that period.
To finally beat the crisis, policy makers outside the U.S. may have to show the same flexibility as their U.S. counterparts. The markets were unnerved earlier this week after a summit of European leaders concluded without a comprehensive, cross-border remedy for their banks' deepening woes, forcing countries to go it alone.
The U.K. yesterday granted Britain's banks an unprecedented 50-billion-pound ($86 billion) lifeline and emergency loans from the central bank.
New Investment strategy towards american economic crisis
Since lately, we have seen a lot of companies collapse due to economic downturn faced by America. The biggest issue is on the 'sub-prime mortgage', which has caused investor to miss billion of dollars. For those who really understand about the concept of 'sub-prime mortgage', the condition in America is getting worst when all the sub-prime loans have been converted (securitized) to become 'Mortgage -backed security'.
Lehman Brothers and Merrill Lynch are the biggest founder for this kind of what so called 'debt trading'. Even AIG, among the giant insurance company also dying and require help from American government. It begin when the properties in America become 'bubble'. Means that the value of the properties have reached to unsustainable level in which the price could not be affordable by most of American resident and this would cause higher 'defaulter' or Non Performance Loan (NPL). Since the NPL in America is getting worst, the above term also highly affected as they have a very strong economical symbiosis. Capital injection done by US government amount USD 700 Billion to 1 trillion to buy all the NPL assets might cause situation to become even worst.
American economist suggest that those investors who took risks to earn profits must also bear the losses.The government can ensure a well-functioning financial industry without bailing out particular investors and institutions whose choices proved unwise.