Lost in all the myopic panic in the US about the health of our financial system and the bail out bill, is the fact that it really is a worldwide economy and a worldwide problem. Large firms in Europe and Asia are at risk as well.
But WHY? is the question. About fifteen years ago when there was a huge spate of bank failures in Japan, Americans who were interested read about it, but that was about it. There was no visible impact in the US, and “Main Street”, as our candidates of 2008 as so fond of calling regular people, took no notice at all.
There was a similar yawn over the SE Asian monetary crisis a bit more recently, though if one had invested in or traveled frequently to places like Thailand, it couldn’t help but be noticed.
But now it seems the world is different. It is my understanding that the Chinese and Europeans own a huge amount of the bad US mortgage debt, purchased willingly from US institutions in an effort to make a large profit.
Check out this story, http://www.time.com/time/business/article/0,8599,1846466,00.html; while it focuses on Europe, it hammers home that the crisis is global and that, surprisingly, the US authorities may be doing the better job of addressing it.
Everyone who got a bad taste in their mouth about the bail out (like me), needs to realize that not only was it totally necessary, but that around the world similarly drastic measures are being or will be taken.
While it won’t make the $700B any less painful, maybe it will strengthen our resolve to put in place the regulations to ensure that it will never happen again.