There’s no denying that the U.S. has a financial problem that needs to be fixed, but the big debate is on how to go about doing so. Some claim that America is going through a phase of rebalancing itself. If you look around, this is somewhat so -- just look at the softening prices of homes in the subprime market. A lot of the rebalancing is being directed towards getting in ship shape and fit for an environment that’s more normalized. It’s said that we are heading towards a business environment that has normalized levels for savings, liquidity and risk premiums. Banks and other financial institutions are rebalancing their balance sheets by eliminating assets and increasing capital and durations of their funding.
People of America are rebalancing their spending habits and their personal leverage. Even the dollar is going through a rebalance all over the country as housing inventories continue to increase. Those that purchase the inventory will have to obtain financing from the same financiers whose balance sheets are being rebalanced. Many are hoping that this all works out and that soon the housing market will clear.
A lot of people are relying on technology and regulation to change the American industry and the associated financial architecture, which is shaped by global trends. So far, the technology trends are pretty much clear, but the regulatory trends aren’t as much. The financial crisis has opened a large global debate on regulatory reform. With this, there is potential for the organization of guiding principles for financial institutions and markets to handle complications in the future. One special principle that should probably be applied to the reform include global synchronization of regulators, central banks and other financial institutions, which will bring an understanding and management of systemic risk. A failure to plan is planning to fail, so without the financial systems coming together to create regulations to follow, this financial meltdown will happen all over again. Plus, it’s always better to be safe than sorry.
During the debates it is important the each party is willing to give a little because beggars can’t be choosers. The financial crisis is affecting everyone now, so everyone has to put their two cents in and take the two cents of others in order to fix the financial crisis in the U.S. and around the world.
Robin Trehan is management and financial expert. More information on him can be found at latestbusinessreport.com