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“When US President-elect Barack Obama takes office in January, the crisis will be even bigger,” Kumar said while delivering a lecture on the current financial turmoil and lessons for the future at the Ahmedabad Management Association today.
“The $150 billion tax cut package for the housing sector was too little and too late to prevent a collapse of much greater magnitude,” Kumar said, adding that “every facet of the financial sector has been affected by the financial turmoil. Got sucked into the turmoil.”
“Financial markets in the US were deregulated over the past two decades under the guidance of Alan Greenspan, as he acted on the assumption that the markets themselves were stabilizing,” Kumar said, but in a recent testimony, Greenspan acknowledged Did that he was wrong for 16 years.” America Leading Daily.
He said the regulation led to the collapse of Lehman Brothers, Bear Stern and other troubled entities.
“The government has intervened, the crisis has slowed down, but now there is a crisis of confidence among banks. Financial and money markets work on trust and confidence to some extent and it should not be shattered at any cost,” he said. “
Arun Kumar said, “The decline in the US was so much sharper than the gradual increase because banks were embroiled in deals. There were instruments promising very high returns due to deregulation and even asset pricing. Even a minor fall triggered it.”
The US economy was thriving on borrowed funds, so countries like Japan, China, Iceland, Ukraine and others are in deep trouble after the crisis. Arun Kumar said that China is looking for ways to decouple from the dollar after the fall in corporate profits.
He cautioned that now the protectionism of the economy is creeping in due to lack of confidence, that too is dangerous. So when US President-elect Barack Obama enters office he will prioritize job creation in areas like BPOs and call centers, Kumar said, adding that the last 1.5 billion job losses have been reported in the US.
So at this historic juncture there is a need for an out-of-box re-architecting of the $600 trillion financial sector, he said.
Kumar said that in the backdrop of such a scenario, the G20 initiative is important and to overcome this, comprehensive coordination between the government including India should be developed.
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