Finance

Finance

The more money comes, the deeper it burns a hole in our pocket - ANALYSIS

The more money comes, the deeper it burns a hole in our pocket - <font color=red>ANALYSIS </font>

15 January 2009 09:06 (UTC +04:00)

So far, there is an acute deficit of world currencies, posing global problems to the world economy. Despite the fact that the world powers pump a great deal of money to combat the economic crisis, the purchasing power is still very low in the consumer market.

This is due to the fact that the bulk of the money goes to the rehabilitation of the financial sector, to repay long-term liabilities of banks, to recapitalize the financial institutions most affected by the crisis, as well as the redemption of mortgage-secured bonds of the large mortgage agencies. For example, only $200 billion from 1.5 trillion ($700 billion in October and $800 billion in November, 2008), was used to support small and medium business and consumer lending.
Meanwhile, Spain freed up â‚¬50 billion, Germany â‚¬470 billion, United Kingdom Â£500 billion, Sweden $188 billion in October alone.
From November 2007 to November 2008, the Department of Treasury and the U.S. Fed spent $8 trillion in the form of loans in the banking sector, as well as investment in infrastructure projects.
As you see, the industrial sector is struggling to survive by cutting jobs against the backdrop of the world financial sector rescue.
Pumping relatively small amounts of money to major is not able to prevent a fall in consumer activity.
Tens of thousands of small industrial enterprises are able to keep employed as ten times many workers as ten auto giants can.
So far, the financial infusion bypasses this important sector. It should be noted that the international community acted too late to fight against the global economic crisis.
The crisis began as a mortgage crisis in 2006, destroyed the financial sector of the economy of the world from the first quarter of 2008, and the stakeholders moved to combat the crisis since October 2008.
This is because many large states for a long time didnâ€™t want to admit the crisis, and spent much time to take anti-crisis programs.
As a result, recession has already started in most states. It is not uneasy to make a logical conclusion: the world is not fighting against the â€œmonsterâ€, but against his shadow. I think it is high time to unpack effective programs to support small and medium-sized businesses. In the rapidly emerging economies like China, we can say the smaller producers, mainly family teams, each of which employ up to twenty workers, play a vital part. Most of these â€œcompaniesâ€ are engaged in the cultivation and processing of agricultural goods, the production of meat and dairy foods, bread baking, farming, small manufacturing construction materials, mini-textile production, furniture making, as well as services and many others.
The state is not able to finance the development of this sector in full, it can only create an enabling environment through low taxation and more flexible laws in relation to such enterprises.
At the same time, the banking sector needs to develop another credit policy in relation to such socially important enterprises, most flexible collateral security policy since the overwhelming majority of these enterprises lack a lien.
Perhaps, the state could be part of supervising the return of these loans through the establishment of regional development offices.
For example, a national committee to monitor the market development does this function in China. If no measures are taken, while the financial sector is solving the problems in the interbank loan debts, the real sector of the economy will further tumble and new unemployed people will add to the poor consumers, and more small and medium-sized enterprises will perish. And, mere consumers have nothing to do but to wait by cutting our spending. If the real economy does not receive necessary funds for recovery in a few months, the crisis will knock on our doors, and outstay our welcome by living with us for at least several years.

Kochari Hasanov, Director of â€œBÄ°ZÄ°M VÆTÆNâ€ Public Information Center