We are observing the most serious crisis since Great Depression (1929-1930). Mr. Steve explained the whole banking process by which a bank lend a person as much as 5 times his salary for him to buy a flat. The bank sells debt to other for a shared interest and risk that we call CDOs (collateralized debt obligations), CDOs was traded globally. If the house prices fall and other thing is increasing interest rate, people can not pay back their loans and they lose trust in CDOs, therefore the negative effects contagion quickly in the global market. It is the time for Governments to step in, trying to save the banks. In fact, governments may not have enough money for this liquidity crisis, leading to bankruptcy/unemployment. Banks run and the stock markets fall.
Who is blamed? Globalization. The philosophy of Globalization is liberalization in trade, finance, people, free movement, free cross border activities. Therefore, the economic borders have been reduced and old rules have been removed for that kind of liberalization. So freedom for WHO? Only Multi-national company are beneficial to exploit outsources and pay low wage for local workers like GAP in Indonesia. However, Globalization is now not working - the question is whether we need a new philosophy?
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