Put your money where your mouth is

The debate naturally focused on US voters, but people around the world are anxious to see how the next US president will deal with this emergency, the consequences of which are likely to linger for years. The economic woes in the US could trigger a global recession next year. The International Monetary Fund admitted in a report that the global economy will enter a major downturn. The US economy will expand by only 0.1 per cent in 2009, after growth of 1.6 per cent this year. Growth is also slowing down in China, as it is in many other countries.

Many nations look to the US economy for inspiration. Thailand, for instance, has, in the past, emulated the US financial sector, following suit by liberalising the financial market. But some countries are now questioning whether the US model was the right one to follow and whether the US will be able to solve the present crisis. The new US president will indeed have a difficult job living up to campaign promises.

The IMF yesterday urged central banks to collectively throw lifelines to a global banking system sinking in turmoil, saying US$675 billion (Bt23 trillion) will be needed over the next five years. Loan defaults in the US are increasing and declared losses are expected to reach $1.4 trillion dollars.

The US has preached deregulation and financial liberalisation to the world. The world is now anxious to see how the US deals with this gigantic problem created as a result of that preaching. If the US administration fails to do so effectively, it could lead to more severe repercussions worldwide.