The devastating effects the US financial turmoil and tumbling oil prices had trigger the global economic crisis. It sent the Russian stock markets into their biggest downward spiral since 1998.
Trading has been suspended on Russia's leading stock exchange after shares plunged by more than 15 percent amid a backdrop of falling oil prices and fears over the global economy.
Trading was halted on MICEX at 1:35 p.m. (0935GMT) for one hour Monday. Shares fell by 15.4 percent to 781.8 points. The benchmark RTS index fell by 13.9 percent to 921.7 points, but continued to trade. Mining firm Norilsk Nickel fell by 25 percent on the MICEX. State-backed lender Sberbank by 16 percent and state-controlled oil major Rosneft by 17.4 percent.
Although US$700 billion (RM2.4 trillion) fund to buy illiquid securities is controversial and could be debated, I couldn't agree more with the US government.
Washington's bailout package though claimed to be unpopular with the public and doubted by some analysts, it is claimed to be the biggest effort yet by the US government to ease the worst global financial crisis since the Great Depression. Yet military power of the US is the main instrument to purge the world to give value to the USD which put the global economy at risk.
Ironically, USD is not being backed by gold although it has been the preferred currency of world trade; it purged the global economy at risk as USD is a worthless paper without any backing of tangible value like gold or silver as required for other countries. The value of the USD paper money is believed moving closer to zero.
It clearly stated by the official web site of the US Treasury that Federal Reserve Notes are backed by nothing.
“Federal Reserve notes are not redeemable in gold, silver or any other commodity, and receive no backing by anything. This has been the case since 1933. The notes have no value for themselves, but for what they will buy. In another sense, because they are legal tender, Federal Reserve notes are "backed" by all the goods and services in the economy.”
Washington's bailout package is interprets as printing the money without backing of any gold. It created too much fiat paper currency floating around in relation to current gold holdings in the current global financial system. It’s beyond imaginable but is a reality that is unacceptable by simple layman.
It was inevitable that Smithsonian system of fixed exchange rates without gold had smashed apart on the rocks of economic reality in which gold as the banks preferred interest bearing certificates to holding gold bullion. What a ridiculous for once again, the countries were pledged to maintain fixed exchange rates, but with the exception that without backing of gold or world money, US is permitted to print such a big amount of money.
The Smithsonian Agreement December 1971, hailed by President Nixon as the greatest monetary agreement in the history of the world, which was overt and covert by hidden political agenda to exploit the global financial system. It is even more shaky and unsound than the gold exchange standard of the 1920s Bretton Woods.
Undeniably, it is all the fault of Alan Greenspan to reduced interest rates to the point where almost anyone could get a home loan even if they weren't qualified for it. It caused the Lehman Brothers Holdings Inc. filed the biggest bankruptcy in US history after the failure of AIG.
While Asian Financial Crisis gripped much of Asia beginning in July 1997, above and beyond all other consideration, the suggestion of IMF through a series of drastic economic reforms was based on the neo-liberal economic principles - the "structural adjustment package".
The Americans suggested crisis-struck nations reducing deficits by cutting down on government spending, allow the insolvent banks and financial institutions to bankrupt but selling off to Americans investors at fire-sale prices and raise interest rates more aggressively.
Noted the contradiction nature of these move and the gross US external debt was over US$13 trillion as of June 2008, evidently the rescue package of US$700 billion that claimed to stabilize the economy to bailout the bad mortgage manage by looted management is such a Hippocrates and unjustified.
The United States could be heading for a significant recession as the financial crisis bites, but the euro area may suffer no worse than an economic slowdown, according to an authoritative new report.
The study from the International Monetary Fund also warned that a banking crisis tends to double or triple the severity of the economic downturn that follows. This underlines the scale of the slump facing the broader economy both in the UK and elsewhere.
It warned that: "The financial turmoil that began in the summer of 2007 has mutated into a full-blown crisis," adding that there is now "a substantial likelihood of a sharp downturn in the US."
The warning came in excerpts of the IMF's closely-watched World Economic Outlook. It may cause some controversy, since a number of euro zone countries are already facing recession, while the US was still expanding in the second quarter of the year.
It contrasts with its comparatively optimistic forecast for the US economy earlier this year, which said that the US would only shrink slightly before bouncing back next year.
However, the report's author, Charles Collyns, warned that it was unrealistic for a country to expect to endure a banking crisis and avoid a major economic jolt as a consequence.
"I cannot think of an example of a country that had a major banking system failure and did not suffer serious economic consequences as a result," he said.
"When the banking system suffers major damage, as in the current episode, the likelihood of a severe and protracted downturn in activity increases."
The report added that in the euro area: "The relatively strong position of households offers some protection against a sharp downturn, despite the appreciable run-up in asset prices and the credit ratio ahead of the current financial turmoil." - Edmund Conway, Economics Editor
Gerakan is a well-known Penang base political party especially during the era of Gerakan-led Penang government. When it started off as an opposition party, people did have very high hopes and expectations for them. But gone away are the golden days and the party is at its upmost challenging crossroads following the dismal results of the March 8, 2008 general election.
Gerakan is claimed to be dejected or demoralized. Practically, it was whitewashed only with just two parliamentary and four state seats captured. The dismal result showed a political scenario that Gerakan can’t remain its relevancy in Barisan Nasional. It is by far the most serious issue to be addressed if lack of urgency to stop the political decline. It is a controversial claimed by the opposition that the instigation of racial animosities and scum racists had contributed to the collapse of confidence in BN and voted many of the racist out of office in the March election.
The questions arise, will Gerakan survive politically after suffering the major setback and what are the next political strategies? Will the scenario turn into a destabilizing and destructive force in the political system? Looking for excuses and spinning the issues were the main strategy after its massive losses in the March 8 polls were the immediate remedies taken by Gerakan to stabilize the supporters and party members. Unexpectedly, it caused undermine and most critical internal challenge from the radical group of Penang UMNO.
The primary differences between these two political parties emerged after Gerakan suffering the massive setback in Penang. Viewed in this context, these negative political forces are identifying the consequences of losing state government power and causing the basic dividing line between Gerakan and UMNO.
Obviously the future of Gerakan is still uncertain and it could be well die a natural death. One of the most important questions emerging is none other than should Gerakan pull out from Barisan Nasional? There seem to be three possibilities for the variation in the ease or difficulty for the future of Gerakan although 60 percent of its members wanted to quit the coalition; Gerakan can continue to stay in the Barisan Nasional but to review its position in BN; withdrawal from the Barisan Nasional and become independent opposition party or joining Parti Keadilan Rakyat.
The political parties that seem to share common ground on many issues fail to agree each other especially the issue of ISA was claimed by some political analysis to be the root cause of the internal conflict in BN. The absences of “good faith bargaining” after the dismal general results seem that Gerakan lost his bargaining power and not entertained by UMNO. This is a big shame and embracement of the party which is simply unacceptable by Gerakan.
The simplest way of measuring this criterion is whether there exist any priori unwillingness to negotiate with a losing people’s mandate party which caused a complete absence of “deal-breaking” preconditions reflected by the radical group of Penang UMNO’s recent sentiments. This would be a fairly simple determination of whether the partnership either agreed to or otherwise on the spirit of Barisan Nasional based upon their parties’ core values and current status. It would seem the proposal of withdrawal from Barisan Nasional to become independent opposition party might be another alternative for Gerakan to strategize its political game plan. Should the role of watchdog and pressure group over both the BN and Pakatan Rakyat bring the reinvent of the party are the aspects to be considered.
The solution of leaving Barisan Nasional and joining the Pakatan Rakyat opposition alliance is another option for Gerakan. It did not surprise many people as it was something to be expected as the party had displayed such a tendency. But it just working like the two pedals of a bicycle that rotate the connecting chain and move the entire mechanism.
By and large, the political status and role play by joining Pakatan Rakyat to establish at least a potential coherent minimum-winning alliance seems need to be considered carefully by Gerakan. It is the responsibility of the political elite to bargain for a better consensus although Gerakan is very weak and lost much good faith bargaining now.
Can Gerakan be able to reinvent itself to springboard towards the possibility of recapturing power at the next general election through increasing more Malays and less Chinese members or otherwise?
In order to be heading in the right direction, Gerakan should be very wise about the mythical. Should it carve out a niche for itself, or it may well die a natural death.
