29 September, 2008

Should the USA be filing for Chapter 11?

I remember the words of my granny so very clearly " Dont borrow what u cant repay. If you dont need to borrow, just dont." This is while reading about the banks and large financial powerhouses eating crow.

I dont understand the intricate game of finance the way they play it in those circles, but does it need to be so elaborate and complicated?
Warren Buffet says, keep your investments simple. Dont invest in things u dont understand. Buffet and my granny would have made quite a pair. Remember him telling his shareholders "The guys who invented derivatives, he referred to options & futures, should be hanged " or something to that effect. Yet the Americans chose to ignore the Oracle of Omaha...

We are a third world country with third world ideas, we should be thinking & doing things differently to be in the first world. Blindly apeing the west in all manners for convenience and process can be just as dangerous. Take from them what is worth taking like their work ethic & discipline, not their fast food.
I love my fast food which comes to me in a steel plate, never mind though, that today am charged extra for sambar and chutney. It still beats the junk wrapped in butter paper served on a plastic tray. Cereal breakfasts are not for me, a good solid Kheemapau beats the living daylights out of any thing American.

These are just stray thoughts as we await the following

  • Whether the aid component of $700 billion or more is approved by the senate
  • Whether its going to be sufficient?
  • Who foots the bill this time, rather where are they going to create this required money from?
  • Whether someone has got the measure of how deep the rotten roots of the sub-prime have gone to - this is while the US govt plays at the socialist game of nationalisation to uphold the falling domino of finance. And finally
  • Whether the US of A should actually join its elite neighbours to the south and file for Chapter 11?

3 comments:

Suhas said...

The entire world seems to be questioning the idea of borrowing based on future earning potential.
Now if that has to happen, not only America but the entire system of credit will have to file for chapter 11.

Kau Kau goes the Crow said...

The idea of credit has its basis in future earnings, without a doubt.

The fundamental tenet is the accurate evaluation of it and quantum of lending based on it. The system veered away from this principle and the sub -prime crisis is the result.The system played with Leverage abusing it so much that they inflated and re-rated asset value.
Now the time has come when you go back to the basics.And we wait for the churn to dissipate while it stabilizes and one has no choice but to bear the aftershocks.

Nits said...

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