| How do people from different continents, cultures | | | | the global financial system, sooner than anyone could |
| and regions respond to a particular situation? We can | | | | comprehend. |
| analyze this with the example of a classic case - the | | | | The Europeans took a longer time to face the reality |
| response of Americans and Europeans to the financial | | | | but Gordon Brown; the British Prime Minister emerged |
| crisis on hand. | | | | as a wise man, when he decided to address the |
| Europe took a long time to understand and accept | | | | serious issue of recapitalizing the banks and |
| that they have been affected by the crisis in | | | | re-establishing the liquidity in the money markets. |
| America. No one can dispute that the banking system | | | | From the beginning, the state ownership of the |
| is truly interconnected and we are facing the woes | | | | industry had been prevailing in Europe. They took this |
| of trade liberalization and the other policies of a | | | | a step forward with Britain taking a natural lead and |
| free-market. The global financial system seemed to | | | | invested $250 billion in the banks, the best bail-out |
| be heading for a crash with just one economy, | | | | plan, ever. The markets responded accordingly, and |
| though a strong one, at that that became shaky. | | | | ended the week up by 8.2% compared to a 4.5% in |
| There is no doubt that the foundations and the | | | | the Wall Street. European Capitalism seemed to be |
| fundamentals are built on weak pillars and emphasize | | | | better suited as a system in the face of a crisis. In |
| a need for a better system. | | | | the U.K., there are serious contemplations by the |
| The mortgage crisis, when it started, created a panic | | | | media and the political class about the larger factors |
| amongst the Americans, and the Government with a | | | | responsible for this debt on hand as against the |
| dampening effect on the Wall Street. The | | | | Americans who were blaming elsewhere. |
| Government has lost its ability of far-sightedness and | | | | France and Germany, Spain, Switzerland and Britain |
| in an effort to resolve the bad-mortgage crisis, | | | | are investing to the tune of $ 1 trillion dollars and |
| ended by buying hundreds of billions in bad-loans. | | | | thus, changed their normal glacial approach while |
| They lost their analytical ability to realize that a far | | | | making a policy. The Americans realized that far too |
| serious threat to the system was looming nearby, in | | | | long, they have characterized themselves as liberal |
| addition to losing a heavy amount of investment. This | | | | and that being more pragmatic could be the key. |
| created a 20% decrease in the Wall Street and | | | | They followed suit to the course led by the |
| created more panic. The Americans initiated the | | | | Europeans. |
| blame on the system, the corruptions involved and | | | | In the global economy, Europe has emerged with a |
| the ambivalent politicians who were keen on the | | | | new sense of leadership and America could lose its |
| interests of their parties rather than that of the | | | | place as the standard bearer of trade liberalization. |
| nation. They did not own up-to the fact that they | | | | The Europeans need to build their confidence with |
| were simply spending more than what they were | | | | the Americans cutting down on their over-confidence. |
| earning. The personal debt in the U.S. is an average | | | | Gordon Brown has emerged the savior to lead the |
| $20,000 per household, with an average savings rate | | | | world in these difficult times. There seem to be |
| at 0% (from 10.8% in 1984). The world could not | | | | newer perspectives in the horizon and let us keep a |
| ignore the distressing signals which could bring down | | | | look-out for the same. |