The World Reacts to Inject More Money

World authorities are starting to think along the same lines in order to stem the chaotic scenes that we are all witnessing as a fall out of the global economic crisis. It’s clear that world financial markets are far too interconnected now for there to be any sort of singular country response that is going to stem investor fears. While the USA Bailout package was supposed to help stabilise markets – it did nothing. Primarily due to investor fear still running the market decline, and secondly because it’s going to be months before debt securities are purchased and the money starts flowing.

So the strategy now ? Inject more money in return for equity ownership. 

World Governments believe that by injecting a bucket load of cash into banks in return for equity and all sorts of guarantees – they are going to stop the market panic, at least in the short term. Credits markets have crystallized and each and every day, the markets are free falling – so it’s clear that something needs to be done. 

Will it work ?

Probably in the short term. But the biggest fear from my analysis on the situation is that inflation will start to rise. You cannot dump huge amounts of liquidity into the markets and not expect inflation to rise. Of course, on the flip side of this argument – analysts will suggest that with unemployment rising higher, oil prices falling and wage pressure hammering organisations – inflation may not be the problem – rather, deflation will be. 

Either way – what does it all mean ? Well, it definitely means, regardless of what anyone tells you, thats its a time to be risk adverse in the short term. Growth is definitely to going to slow, if not reverse, in most economic nations and this is going to hit underlying profitability of big organisations.