Nepali Times Asian Paints
ARTHA BEED
Economic Sense
The American dream


ARTHA BEED



SAM KANG LI

Washington DC: Consumers in the US are paying the highest prices for oil, but we do not see angry protests like in Nepal. They know it is a product which is governed by market forces, and if the prices increase more than they can afford, they will reduce consumption.

Food prices have also started to climb, and for poorer people who comprise of nearly a third of the population, life is becoming increasingly difficult. Home prices have plummeted as mortgage companies are busy foreclosing properties and writing off loans, thus creating unprecedented losses for the banks and other financial institutions.

The US government has plans to rescue the economy: taxes have been cut to actually dole out money to taxpayers so that they can spend more to stimulate economic activity again. It is a country which has always believed that so long as the cash registers at supermarkets stay ticking, the economy will keep going.

If we feel that the banking and financial industry in Nepal is not regulated and there is room to dodge the regulator, then what has been going on in the US for once makes us look like a molehill in front of a mountain.

This Beed's seven-year-old daughter recently advised her dad on a way to make more money: it was to sell money, so that he could buy more money and sell that money thus making even more money. It seems this is what has been happening in many big banks which keep on churning out innovative products.

A bond issued by one division of the bank is rated by a subsidiary, to be bought by another group company and sold to another division, at the same booking profits, paying fat bonuses to staff and giving good returns to the shareholders. But the weak foundations of this system have started to crack, and huge losses are being reported as the base of money from which more money is made is now gone.

The presidential primaries this year are witnessing a bitter battle in the Democrat camp. The bile unleashed in the show-down between Obama and Clinton may turn out to be greater than the actual election next year. But for the US, the present is not the main worry, it is the future of the country keeping the think tanks busy.

The acceleration of economic growth in both India and China, the bouncing back of the EU and the demographic shift that lies ahead are challenging the US' ability to maintain its dominance for the next 50 years as it has for the last 50. In what may be the start of a more outward-looking worldview, there are plans for massive study abroad programs for US students. There is also much talk of the growing influence of Asian Americans, who have close links to growing markets, and their potential role in the future of the United States.

On the other hand, the looming scarcity of money may mean that the US scales back its aid budgets, which could also lead to belt-tightening in countries like Nepal.

Of course, the Americans won't go cheap on expenses which directly benefit themselves though, which is good news for Nepal.

www.arthabeed.com



LATEST ISSUE
638
(11 JAN 2013 - 17 JAN 2013)


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