A few months ago Pakistani investors watched wide eyed as they saw their savings invested into the KSE or Karachi stock exchange literally melt away in front of their eyes. The KSE had been growing at phenomenal rates for the last 3 years averaging gains of about 90-99% attracting investment from all over this country and from all over the world. In the Kse’s case the symptoms of a crash were already present, a ballooning militancy problem at the north, rising oil prices making the countries ex chequer lose billions in imported oil and add to that an absolute vacuum of political leadership at the helm causing the grand crash of all time.
However after the news that has been coming in from the U.S it seems like we are not the only ones to suffer a major financial shakeup. On Monday one of the oldest and the fourth largest investment bank in the U.S Lehman Brothers filed for bankruptcy . As soon as they did this, the next day European central banks pumped billions more in short-term credit into the financial system to shore up confidence in the aftermath of the collapse of this institution.
This move has led to the fall of banking shares across the board in almost all major stock exchanges of the world. Brokers are panicking and although Asian markets have little exposure in the U.S market they are all selling off as much banking portfolio as possible. The reason for Lehmans self destruction? The housing crises in the U.S basically translating to the top most lending sector in the U.S unable to pay back leading to the bursting of the biggest housing boom ever and a death knell to companies like Lehman who invested in it.
As if this news was not scary enough “Merryl Lynch” was bought out in an all shares deal for USD 50 billion by Bank Of America. Yes, Merryl Lynch has been sold. As we speak investment bankers around the world are betting on who will go next!! Another bankruptcy ala Lehman and we might have a crippling blow to the U.S economy. We might see the stock exchanges of the world tumble like dominoes and we just might I think get to see the beginning of the end of the U.S as the major military and economic superpower of this world. how does this happen? Well its simple, if the stock exchanges fall public investment gets reduced to a big fat 0. Public investment is basically many a normal persons life savings invested in these companies, leading to a crippling effect to the U.S consumer power, in turn leading to a crippling effect on their demand and thus an end to the whole market economy syndrome.
To think Dubya wanted to be remembered as the man who went out after striking a crippling blow in the war on terror and capturing OBL, it seems to me that his enormous expenditures in the shape of these nonsensical wars have built his economy a hole just big enough to be buried in. Obviously this might take down a few asian economies who rely on exports to the U.S like us but hey, this is what happens when you fuck up right? The daisy cutters are coming home to roost.