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PUBLISHED: Student & Campus Section, Manila Bulletin, 8 October 2008 Issue (Page E-3)

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It seems to me like the only issue hitting the global headlines these past few weeks is the financial crisis that the US is currently facing. It strikes me as funny in a scary sort of way. It’s funny because I don’t recall any other instance in recent history of our world leaders coming together to agree that
a) There is a problem, and
b) We all have to do our part to solve it.

I guess money talks in a way that global warming doesn’t.

Nonetheless, it is an issue that everyone should rightfully be worried about. This crisis has drawn comparisons to no less than the Great Depression, and the world’s leading economists figure that things won’t be getting better anytime soon.

While our president tells us that there’s nothing to worry about because we have ‘fundamentally sound economics’ (whatever that means), it doesn’t take a rocket scientist to figure out that if the US slows down, then so do we. They’re easily our biggest trading partner, not to mention that our currency is tied to theirs.

It is precisely this dependence on the United States—and not just by our country—which makes the measures they will take a very big deal. There are mixed reactions to the $700 billion bailout that was approved-shortly-after-it-was-rejected, but the international community generally sees it as a good move. After all, if the US government doesn’t bail these big companies out, then the rest of the world is in for a very painful crash. It’s their responsibility to clean up the mess they’ve made, isn’t it?

If this were true, then I wish we could say the same for the companies we’re bailing out, because it’s not their money that they’ve misused, its other people’s. And it’s these ‘other people’ they’re relying on to bail them out again.

I think this is the height of injustice.

In the first place, a large part of what made this crisis possible is the fact that these investment banks and mortgage-brokers kept on taking questionable loans, in the illusion that profits would continue to expand unstoppably (which sounds an awful lot like history repeating itself).

Simply speaking, they kept on lending money to people who couldn’t necessarily pay them back, so that when times got hard and people started defaulting on their loans, these companies were left with a lot of compensating to do. They compensated using the money that other people entrusted them with, and that’s how they became bankrupt.

Practically speaking, this means that money invested in these companies is lost. Pensioners cannot look forward to a stable retirement. Jobs will continue to vanish. Incomes will also disappear, and in our case, this might mean OFW remittances. Investors will be more afraid to invest, and as they grow more averse to risk, losses will occur in the stock market.

Most importantly, whichever way the world economy goes, it is our generation who will be facing the brunt of its effects.

In the end, however, these companies and the people who run them are very lucky people. They stand to lose but a few luxuries: one of their many houses, probably a yacht.

On the other hand, the rest of us are going to have to buckle up, because our money is going into saving their businesses. What do we stand to lose? A life’s worth of savings, a stable retirement, maybe a house you haven’t fully paid for—what could easily be a life, so to speak. This, apparently, is our reward for putting our trust with them.

If you don’t think that’s the height of oppression, think about this: we’re bailing out these companies because we have to. They’re simply too important to be allowed to fail; their collapse will deal a huge blow to the world’s financial system, which could easily mean another, Greater Depression. And after we bail them out, we’ll still be subject to the same system.

The old saying goes that you should never bite the hand that feeds. In this case, it’s also that we can’t. But if there’s any consolation, it’s the fact that the big people now have to put their money where their mouth is.

Oh, but wait—they don’t have it anymore.

This entry was posted on Thursday, October 9th, 2008 at 9:58 pm and is filed under iThink. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.