US as the world's only financial superpower

Regulation, says former US President Bill Clinton is the solution to the US sub-prime crisis. Speaking at Dave Letterman's show, Bill blames the American's penchant for making money out of money which created this pyramidal financial web that now threatens the economy. What's needed, says Bill, is for the Fed Reserve to infuse life in the economy, by absorbing the toxic debts, and enabling banks to free their books and expand their loan portfolios. That will allow American enterprises to still borrow money and support expansion of their businesses. Without expansion, the economy will continue to remain laggard and could seriously lead to depression.

Or, Washington could allow mortgagees to restructure their loans, making payments reasonably low to enable them to at least pay those amortizations. In this way at least, money would pour in instead of the present situation where there's nothing coming in.

And Washington seems to be the obvious winner in all of these. By infusing $700 billion into the financial system, it would control most of the global financial institutions through loans. That will, in effect, make Washington the world's biggest financial institution.

Some Americans are worried that the US will lose its global dominance due to this crisis. Yet, it's the opposite. The US government, through the Federal Reserve, will now become the world's only financial superpower should the US Congress allow Paulson and Bernanke's bailout proposal.

If that happens, then the world has entered a New era of neo-imperialism. Scrumpeter maybe right that obviously capitalism dies within a cycle of 50 years, then, slowly comes to life through creative deconstruction. What we are now seeing is the death not of capitalism per se, but the rise of regulated capitalism. What will be the effects of this newer kind of capitalism? We will never know, says Bill Clinton.

No need to panic, says Monsod

Former Socio-Economic adviser Solita Monsod says there's nothing to panic about the current economic imbroglio we're in. " We've been through worst before when we had that crisis in 1974", says the UP economics professor and former TV host.

Well, tell that to US investors, Solita. Hundreds of investors are worried over what US Fed Reserve Chief Bernanke has for a followup. Yesterday, Bernanke painted a gloomy picture for the US economy. He says we have'nt seen the worst yet for the US economy. Analysts are predicting 150 banks to fall this year due to the worsening sub-prime crisis. Bernanke said the same thing and investors are hoping that his announcement either today or tomorrow would somewhat be better than the near-shattering one he unleashed yesterday.

A 5.2 growth rate, says Monsod, is nothing to be worried about. It just says that we'll have lower growth than other economies, say Singapore or Hongkong. What causes slower growth? “Government accounts for a lot of the weaknesses. We have now become much more open, but the bad news is that the corruption, the legal system, the weaknesses of our institutions are driving us down,” adds Monsod.

What's puzzling, says Monsod, is the fact that it did'nt alleviate poverty. In fact, the number of poor people even increased exponentially with that of economic growth.

I think Monsod is forgetting that these optimistic economic projections are just that--projections. What would happen to us should Bernanke announced a gloomier economic scenario for the US economy? Surely, that would make a very serious impact on our economy. And to think that, this early, analysts are saying that our equity investments will sorely be affected by the US sub-prime crisis.

So, there's no reason at all to panic, huh, Solita?