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Thursday, October 2, 2008


Its surprising, I have the word 'business' in front of everything in my description but I haven't actually posted anything concrete that concerns the economy, yet. I'm doing it now.

You might have/not noticed or heard about the US economy (which has a major global effect) is going through some pretty rough time. While the NEPSE (Nepalese stock market) might stay immune to the instability because its so far off and so small, all the other world economies experieced ripple effects after the US stock markets slipped.

The US economy has been troubled ever since George W. Bush took over (not true, I just like to believe that); maybe its because of his War of Terrorism or maybe its because he just doesn't know **it about the economy. Oops. No Cusing.
After 9/11, 2008 has been the worst years for the economy; rising cost of food, sky rocketing oil prices and stock market 'crashes'.

Just few days back, Wall Street or the Dow Jones experienced the sharpest fall in a day, a total of 777.68 points. This might not sound so big since the down is above the 10,000 points mark but if you convert that into cash, it amounts to over an astonishing USD 1 Trillion! Just minutes after the Congress started to vote for President Bush's $700 billion, the Dow started plunging; investors started to sell shares like crazy. It didn't matter what they were selling, they were selling! Five minutes after the vote was over, the dow was already down by 700 points (a trillion dollars within minutes). 10 minutes later, the brokers had sold all their belongings, inlcuding clothes.

The stock market is an interesting place. You can't imagine was happens here or what fuels the changes in the stock prices- rumours, scandals, natural disasters, sneezes, PMS. One of the most prominent incidents in the stock market happened in South Korea when the rumour of Bill Gate's death lost billions. Now, this is what I don't understand, just one person can disrupt a whole market?
Its nice to be in a market which is high on antibodies and where Rs 1.60 Nepalese for 1 Rupee IC is all you have to worry about.

But the US economy does matter. Especially for college students.; what would have been an expensive education a fews years back is now a Godsend. College is more expensive, so are the tickets, food, housing and on top of that there are fewer jobs. Sigh.

Now why isn't US a good breeding ground for us and why can't we 'spread our seeds' efficiently; the answers to this question are the reasons above. When the stock market, which defines the economy, is unstable or experiences downturns, the financial institutions lose investors. Now, capital or investment is what fuels the business, without sufficient amount of it, businesses fail. Redundancies, jobs cuts, selling of assets are the only answers.

Getting back to the bailout. There are numerous viewpoints about the plan for injecting the $700 billion to the stock market. While the people in power claim it to be 'the only' option to revive the US economy, doomsayers have claimed that the bailout will destroy the dollar, the general public are just pissed that the American government is using their money to help the Wall Street brokers and make them even richer.

While House of Representatives said a big "No No", the senate, which consists of the lawmakers of the America, however hesitantly passed the economic package. The senate voted 74-25 for the bailout contary to the House which voted 228-225 against it.

Now, you must be wondering what this $700 billion, which can get to a whooping $5 trillion, is all about. Well, if passed, it would allow the American government to spend money to buy bad mortgage-related securities and other dead/devalued assests held my businesses. In other words, disinfect the market with a large dose of expensive antibiotic.

Now while the House of Representatives votes again on the bailout this Friday, its all a matter of watch and get entertained for us. The economy is in peril and that there is no concrete solution for it, Goldman will turn to Silverman and businesses will lose billions. There is no telling what the $700 billions bailout will do if passed or what will happen to the economy is its not. For now, its a good idea of get rid of all you stocks and buy huge stashes of gold and diamonds; its bewildering, these little 'worth for only showing off' amenities are something that has always seen gain.

Photo:- Stocks markets after the vote in Congress. An error in calculation of google's loses. A warning about the future maybe?

Update:- The lower house is debating on the Economic package and will vote on it for the second time in some time. There is positive indication that the vote will pass this time as more and more house representatives who were against the vote are being dragged into voting for the bailout.

Photo 2: Stocks climb upwards after markets open on Friday. The indication that the Lower House will pass the bailout package this time has relaxed the investors.

Update 2: The Lowerhouse just passed the bailout or now know as the 'rescue' package on a revote. The votes were 263-171 for the plan. Now, the drastic shift in votes has got to do with either rechristening of the issue as "rescue" rather than a "bailout" or maybe because that $700 Billion..oops..$800 Billion is the only medicine of a the ailing economy. Man! $100 more expensive in just few days!

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