The Financial Meltdown of 2008: Siddarth G

Economics, is a branch of the more general theory of human action, deals with all human action, i.e., with mans purposive aiming at the attainment of ends chosen, whatever these ends may be. Ludwig von Mises The financial meltdown of 2008 was one of the most prominent events in recent human history which was so terrible that it was compared next only to The Great Depression of the late 1930s that hit the US. Only this time the implications were bigger owing to the nature of integrated economies that spans the globe. It rendered about 15 million people jobless and close to about 20 million people worldwide that spread across various verticals but caused most damage to manufacturing sector. So what led to this monumental disaster which got the whole world talking about it and many affected by it in one way or another? There a lot of speculations but the truth is plain and simple lack of Sound Monetary and Fiscal Regulations and private financial institutions practices. It started with the global financial powerhouse Lehmann Brothers filing for bankruptcy and this spiralled into a snowball with Merrill Lynch and another giant AIG following suite. The nightmare was just beginning, the worst that had never even been dreamt of was unfolding dramatically right before their eyes. The entire American Financial services came to a standstill, a massive clog in the heart as one had put it across.

There were a lot of lapses in Regulations brought forth by the American Congress. It began during Ronald Regans era of incorporating individuals from Private Financial Institutions into the Federal Reserve and the likes. Short term profits were sought after rather than looking at the long term consequences, and till date all the Heads of the Federal Reserve for the past 2 decades have all been blue collared individuals from high profiled Investment and Financial institutions (Lehman Brothers, Goldman Sachs, Meryll Lynch) titling regulations in favour of their organizational and corporate objectives ignoring all sense of responsibility owed to the shareholders and the society and they serve at large. And this snow balled into the real estate bubble of 2008 where houses were mortgaged like no one elses business to individuals with the least re-payment capabilities and this in turn were sold as bonds and as investment plans thus gambling and placing more bets on assets and holdings that really never existed all this again because of some of the rouge elements titling financial regulations to their advantage for big bonus and meaningless remunerations all at the cost of the average tax payers money. And the result was the epic financial meltdown of 2008 which resulted in the United States losing close to 10 trillion dollars (1000 billion is 1 trillion). It was later during the Obama administration that the congress passed an 800 billion dollar financial bailout. Was this necessary using taxpayers hard earned money to pay for the mistakes made by the intellectually arrogant and so called financial punters? Only time will tell. Id like to conclude by pointing out that even for a country such as ours there has to be sound regulations in place to control menaces such as inflation which in the long run (if it continues to increases as the same rate) would again lead a country to poverty and care would need to be taken to make sure that tax payers money is utilized to subsidize all essential commodities for the common good of its citizens rather then being pocketed by our high profiled politicians. The financial system is a complex system, and the only way forward and to minimize disasters in the future from happening like the once experienced in 08 is sound regulations free from corporate prejudice and influence of powerful individual lobbyists and every state has to take great care to enforce such a system.