Bankruptcies and the greenback

Two things to consider:

1. Bankruptcies..many more to come. One of my friends foresaw the circuit city bankruptcy months ago (and I can’t recall who!). I see no point in bailouts, and strongly think filing for chapter 11 bankruptcy is the way to go. We have a system in place in this country where companies are better as functioning entities than ceasing operations due to lack of funding. This is the bankruptcy code. Companies survive restructuring, reorganization, and shareholders, creditors survive losses. but the business will still continue – isn’t that the objective of the govt.? There is no need to bail out investors of a company in order to minimize the impact of financial crises on general public. Prime argument in support of the bailout is to increase money supply in the economy so businesses wouldn’t be cash starved for funding projects, hiring talent, etc. But this stream of logic is problematic because institutions are utilizing the bailout package only to clear the debt coming due for these institutions, it is not creating more jobs or lending.

2. US Dollar’s strength.. how long would it last? current “flight to safety” in boosted the dollar’s exchange value. But are the consequences when China and other gulf nations decide to stimulate their domestic economies (as evidenced by the $548bn Chinese govt. stimulus package) and pull out reserves from US to finance projects home front? will it lead to a dollar sell off, and subsequent weakening? US is at mercy of foreign investments, and this is unhealthy going forward.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s