Turning the tables: Can you help Davos leaders?

By Reuters Staff
January 27, 2009

Klaus SchwabDavos is a well-rehearsed event and everyone knows the part they should play. Business and political leaders gather each year to tackle the major challenges of a global economy while the rest of the world, or those of its citizens who are interested, look on from afar. But this year, for obvious reasons, things are different. The notion of leadership has been coupled in the public mind with that of responsibility. The tone here is a little more humble and the attitude more open-minded. There’s a recognition that new thinking is required.  A suitable time, perhaps, to turn the tables on convention and have Davos delegates ask the questions they can’t answer and for global citizens to offer solutions.

Gamefully opening the discourse is Professor Klaus Schwab, Founder and President of the World Economic Forum.

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If you’ve got suggestions for Klaus then use the comments section below.

282 comments

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I do not see current economic crisis as rooted in the financial system. I see it as more a basic systemic flaw in social organization. Essentially our stucture called Capitalism has no reverse gear. When a profitable yet unsustainable process is begun over time the unsustainability becomes apparent. However the process will be maintained by the structure as long as possible to postpone the destructive and painful crash. AKA job losses and company failures.
Currently there is no sustainable way to admit mistakes and reverse a process. In politics to admit a mistake is often a costly loss of face and often results in permanent career damage. Admitting mistakes in other fields often leads to legal action. The whole system is designed to make recognizing and admitting and fixing mistakes as painful as possible.
Real growth in economies is a result of invention and innovation. We have always been in a knowledge economy.
It would be wise for all involved to remember Karl Poppers view on learning. I can’t remember who said it but ” The path to wisdom is to err and err and err, but less and less and less.”
So in my view if we want to permanently get out of the Kondratieff wave cycle we need to implement a political/economic/legal structure friendly to the most successful way of advancing knowledge. That is to try lots of things make lots of mistakes and not penalize for doing so.

Cheers,

Posted by James Demidoff | Report as abusive

How about a REAL TRUE distribution of wealth??? Like taking the largest % of wealth from the 2% of the world that have that wealth and redistribute it in a fair way amongst all the people of the world!!!

I know that is idealism, but so many people starve while so few are millionaires and some of these millionaires have brought us to this present situation.

Posted by Eileen | Report as abusive

The “World Financial Forum Of Religious Scholars” (GFFORS) which is being sponsored by Kabbalistic Solutions For Contemporary Problems is what is needed now. There must be an input from the World’s Religions as to the direction of the Financial community. Ethics without a Religious underpinning is fruitless. Obviously, a new structure is needed. For info: kabbalisticsolutions@gmail.com

Posted by Steven Turner | Report as abusive

Isolationism is the only way we can save ourselves from reliving the Great Depression. Pull everyone out of all the countries we have them in and stop sending funds over seas to help people and reconstruct other countries. Its money we dont have.

Posted by Jessica | Report as abusive

The easy answer tot the question posed about the usage of new technologies is to use scrape webservices for information (also known as crowdsourcing) to understand the issues being investigated, because instead of “asking” people what they think – which is likely to yield a high degree of false-positives and flaming (as the above post does) – you actually look at what they are saying about what you are looking for and end up integrating a huge dataset into your research.

This approach is being practised in a number of ways with the semantic web, most notably by the Simile project and its offshoots over at MIT as well as the Open Calais project. Some examples I can think of is how scraping flickr tags has helped the library of congress to reclassify texts or how the WHO monitors online communications on public platforms for disease trending, and the most potent example: http://labs.aljazeera.net/warongaza/

Of course one major issue with any policy approach that seeks to use contemporary internet-based technology is that the vast majority of people on the planet are not “online”. This actually ramps up the general education and wealth vectors of those “whose opinions matter” in the demographic sense.

:Daniel

The crisis has to run its course. The best resolution to this problem is to let the market eliminate the problems through bankruptcy. Attempts to prop up failed institutions and businesses is fruitless, these entities need to fail, otherwise we’ll never have a solid foundation to build upon. Also, there has to be transparency and revision to central bank policy, we can’t have central banks manipulating the markets the way they have in the past. Controlling market behavior through artificially low interest rates and currency inflation does not work…the present situation is a clear testament to the failings of current economic thought.

The failings of central economic planning we’re supposed be have been killed off, yet here we are again trying to run a supposed free market economy through central economic planning.

Unless we cease this incessant meddling we’ll continue to get more of the same. Let the liquidation of debt occur and allow better business managers to acquire the assets and move forward. The idea that we reward failure through bailout policy is absurd. And the idea that we reward private sector failure with public sector money is even more disturbing.

Posted by steve | Report as abusive

My thoughts are that the government should give massive tax cuts or money to the general population (maybe stimulus check part II). The population with that extra money will either save it (which should help deposit banks or financial firms presuming that’s where they stash their savings), spend it (which will help the retail industry and general trade between the different nations of the world) or pay down debt (which will reduce the amount of write downs banks are doing to cover their behinds when loans and credit go into default).

Also, something should be done to stabilize the housing market. Either use the money to buy up the toxic mortgages and re-write the terms so that the borrower can afford to make those payments but with unemployment being so high, it may be too little, too late.

Posted by Won | Report as abusive

It seems the problem with the current USA market is that people are not spending which is causing the shrinking of the economy, so instead of spending 800billion in bailing out companies that should have gone bankrupt, why not give that to the general population so they can start spending and revive the economy? My 2 cents.

Posted by Lestat | Report as abusive

I like the previous comment “capitalism has no reverse gear” – though to keep the analogy going – coasting in neutral is fine: the weathly countries will load up on infrastructure projects, wages will be lowered, building costs are lowered… and when the economy gets back it gear, the pubcos in those countries will reap larger rewards.

A cool coast in neutral will be good – if infrastructure benefits.

Take a long look at accounting, accounting practices and rules and laws behind them. Accounting is supposed to reflect the state of a business. Compared to the danger inherent in the overvaluation of intangible assets, I think it would be sensible to remove them entirely from the balance sheet.

Some of the losses that are surfacing now, as a result of write downs on “goodwill” and other intangible or subjective valued assets, have been carried by the companies for quite some time.

Current practices allow investment banks and other corporations to bury their losses, and it’s only during downturns in the economy these losses are written down – at least on the scale we are currently seeing. This serves to further emphasize the downwards trend in the economy. These losses should be required to be written of immediately. If the buyer overpays when he acquires a company this should be reflected in the accounts with the regard to the balance sheet of the acquired company, and not according to either the stock valuation or the price the company was acquired for. Some would say that this would lead to improper valuation of the buying company, but I think most investors could learn to live with more transparent accounting practices and the danger resulting from undervaluation are not as severe as the danger that may result from overvaluation.

Obviously this is not a solution to the current economic problems, but it may reduce the damage next time the market takes a downturn.

Posted by emanon | Report as abusive

The financial meltdown was caused by the following:

1. The Fed Chairman and lame-duck “Republican” President (What kind of Republican creates a socialist economic system in the United States?) going on TV for an entire week with doom and gloom–thus severely negatively influencing the markets.

2. Lack of responsibility of leadership in large corporations–including banks. How can a bank lose money when it gives its investors less than 1% in savings and then charges 5 to 10 times more? I’m confused.

3. Capitalism has not been tried–excessive government regulations and interference in key markets has a ripple effect. Since when do U.S. citizens count on the Federal Government (Remember New Orleans?) to solve its problems. Let the market work things out. Government intrusion and Keynesian economics has always been a failure.

4. The selfishness of the largest group of Americans (the baby-boomers) that has ever existed on this planet. They will bankrupt our country and the world as long as they can live high on the hog through their retirements.

5. Abortion and contraception–Destroy life at its root and you destroy the resources necessary for economic development and intelligent solutions to problems.

6. Over-reliance on national and international structures to drive economic prosperity instead of increasing competition through innnovation, encouragement of entrepreneurship and local issues. Globalism will do nothing but destroy local ingenuity and problem solving. Attach economic crises at its local roots. De-regulation and encouragement of more entrepreneurs. Let failed businesses like CitiBank fail as they deserve to.

Posted by Brian | Report as abusive

A stable economic system can only be built when people fully own and possess things, and have real cash to spend. People must own stocks, houses, businesses, or other property and therefore their businesses will be able to weather most financial storms. I have owned several business and have operated these businesses without a bank line of credit. It takes longer to get a business started, but growth is real and there is money in the bank to operate the business rather than credit. I also have seen many businesses fail that operated on credit and they were fine until a downturn, and then they stood alone while their banker demanded money they did’nt have. I realize that this cuts down the banking industry profits from lending to the average consumer, but credit is what brought down the current system.

Posted by Fred Belz | Report as abusive

It is simple my friend. Allow the USA to swallow its bitter medicine. The belief that an economy can have continuous growth is absurd. Non-stop growth is called Cancer. This economy must be allow to experience a painful shrinkage and readjustment into a more clean and mean system. This is a basic law of nature and it does apply to economic systems too.

Posted by Alan O | Report as abusive

attention to the wold the times as come to stop to be greedy the economy it is not hard to fix and i can show you the way to fix strait ways and stop talking you all got no brain the times as change for every one you have a littlet cake from so if you understant there are only one plan that will work and the economy will start to grow again ok and i have the best plan in the all world put them together you are all blind the money will not fix the problem only the new sistem will work it is new way how the world will change fast the plan will take affect

Posted by frank bruno | Report as abusive

I believe some of the global problems can be solved by better globalization. The current global financial system is rooted in capitalistic philosophies. At the same time, the Western economies are based on consumer spending which in the US, for example, constitutes about 70% of the US economy. Most of us have more cars, computers, phones, electronics, shoes, coats, clothes, watches etc. than we can practically use, yet we are expected to purchase more in order to keep the US economy going. At the same time, there is a vast majority of the world’s population barely getting by on scraps of food and horrible living conditions.

As an entrepreneur visiting an emerging economy some years ago, someone asked me what I would request of the country’s leadership if given a chance. I said that I will ask them to provide me electricity, clean water, a good phone/communication system, reliable broadband bandwidth, roads, and security. This is plenty to build any business upon without relying much more on the government.

I am not advocating simple socialism where we take the money from the Western nations and throw it around the world, but suggesting a synergistic collaboration. Given the West’s history of leadership in innovation, why not focus on solving the world’s basic problems of energy, clean water, and hunger by investing our time and money into new technologies in these areas. Then, produce the goods in these areas that may then be provided as aid or in a subsidized manner to those desperately in need. So, say 10% of the US economy is converted into a development economy reducing the US consumer portion to about 60% over the next 2-3 years. Not only will this recover the 6-7% drop in US consumer spending over the past year, imagine the education and development opportunities this can spur in the emerging markets when they have energy for all kinds of basic needs and clean water to keep them healthy etc. Many technologies are already available beyond the labs. However, in some cases these technologies need focused or subsidized development and production for mass use. This would be a great investment from the Western nations in the future of our planet.

Posted by Imran Qidwai | Report as abusive

The present day competitive growth rates and unmoderated greed have to be stemmed to bring in a modicum of stability in the market processes. Secondly,complexity of financial instruments and trade should be reduced to levels within comprehension even if we have super computers to penetrate the maze.

Posted by sash | Report as abusive

The key is Access. Core to President Obama’s successful campaign was enrollment at grass roots level. Why would that be helpful to you? Identify the top five issues as you see them; define clear objectives; stimulate and steer an on-going debate toward those objectives. Use this virtual forum as a focus group; formalise hypothesis and challenge academic institutions worldwide. Review at the next Davos meeting. It is imminent to feel the pulse of the people at large, if you wish to solve the issues at large.

Janine Chung-Thompson, ex PwC

Posted by Janine Thompson | Report as abusive

It’s all about the lack of a GOLD Standard. We have created this Financial Crisis because we hane no means of measurement . . . . without that nothing is going to happen. With a GOLD Standard the problem is very simple to Fix but also very Painful. Everybody wants the “FIX” but nobody especially the Policitians and Bankers want the PAIN. So until things get really Bad and they will . . . . . nothing is going to change. That’s what History shows. To Bad for US.

Posted by John L Strauss | Report as abusive

The troubles all track from the fundamental tendancies of capitalist entities to concentrate ownership amongst ever smaller groups of principles until ultimately a kind of corporate socialism (fascism or classic Italian syndicatalism is achieved. The Depression modified the tendancies of this by first allowing wholesale bankruptcies to clean out failed monopolies that had failed due to their own penultimate and arrogant greed…the governments at the time had no power to really prevent those failures anyway any more than the unemployment insurances and welfare policies of Hoover’s time could have coped with the swamping they eventually got. Then the New Deal re-regulated the economy to stop the trading in worthless stock that had been overmarketed..(blue sky stock with no visible means of support, just like the ‘dot bombs’ of the early part of this decade. This time, as last, it is the banks that are the deep dyed villains of the whole mess. The re-enactment of the Glass-Steagel Act, outlawing interstate and international banking, outlawing large banks over a billion or two capitalization, demanding large reserves in bank funds before they can loan (prevents banks loaning the same money many times in a form of ‘blue sky capitalization’ that would have made a roaring twenties gangster capitalist proud and envious). Steep regulations on the appraisal industry to prevent an unholy alliance of banks, insurers, appraisers, lawyers, realtors and other leeches on the economy from ever defrauding the nation and holding its young people in permanent loan slavery ever again. A national forgiveness of every citizen of the nation, erasing in a stroke of a pen all debts of every citizen while allowing them to keep all their possessions. An immediate write down of all home values to their prices in 1966. Therefor a house in Compton, California or Whittier, California that sold in 1966 for fifteen thousand dollars and now brings over a million dollars for a one or two bedroom shotgun shack on a sixty foot lot…would go back to selling for fifteen thousand dollars. Make felony illegal for any foreign national to own real property in this country. Make illegal and a felony for any foreign corporation to own real property in this nation. Make illegal and a felony for any foreign entity to own a controlling interest in any American business, partnership, limited liability corporation, corporation or any entity that is American. Make it illegal for any goods to be imported into this country if it cannot be proved beyond a shadow of a doubt that it cannot be created by whatever means by American workers in America. Make it a law that the products of slavery and child labor cannot be sold in this country. Create a value added tax structure on an exponentially graduated scale, incorporating a requirement that manufactures selling anything in the American market must file reports to the American government detailing the bare cost of the item and all costs that went into the calculation of this bare cost. Then the VAT would be assessed on the gross profit calculated from the bare cost of the original manufacturer and the final selling price to the end consumer. Such scale would allow honest profits to go relatively untaxed, but profits from slave operations in China where a pair of sneakerss made in a sweatshop for less than fifty cents in labor, materials, SIOH, etc, and ultimately sold to an American kid ‘mall rat’ for over a hundred dollars would pay over ninety nine dollars in VAT, with a further proviso in the law that would prohibit passing on the cost of this VAT to the final consumer. The offending business would have to pay this or face felony punishment. Also the corporate veil would have to have a legal hole in it such that the stockholders and bondholders and debtholders of corporate predators would be exposed to the same charges and felonies that the corporate officers would face, up to and including the death penalty. The average young person making minimum wage in this country now cannot even pay to see HGTV on cable to see how impossible his/her dream of home ownership really is. This has got to change or this country will become increasingly unstable until and unless these changes to the present sytem of robber baron banker capitalism is destroyed. And if that result is a civil war, failed state ala Somalia region, then so be it.

Posted by chester drawers | Report as abusive

A crisis in the Health Care will follow unemployment in the U.S. My suggestion is de-regulating low impact laboratory testing for the general population. As it stands all test results must be reviewed by a Pathologist or desingated laboratory manager.This includes screening test, Cholesterol, Glucose, HCG and ect. The FDA has many CLIA waived test, which can only be run by Physician or an acredidited Laboratory.The State licensures deter any small enteriprises due to liabilty of results. It is just another form of keeping power in the hands of the physicians or large corporations in America. In several states, they have sought to let pharmacies run these test.
The general public should be allowed access to avoid costly visits to the Physicians office. These test are excellent for screening and monitoring patients.It is time to bring back small business in America. Small business do not have stock holders which adds presure to business to be greedier and greedier at whatever it cost.

it is not the bull market it is the people ho drive the market its is not the wall street bull is the people got no money the not buyng people no spending the car manifecture all the building indusry all they fail un less the sistem change right know not by put billions dollars in the hands of the banks or give more money to all this big industry it will never work becouse they they dont understand where the proble come from the money sistem not working there is only one sistem it will work and protect all the industry and protect the people by not lose they jobs they houses cars or go bankrupt there are only one plan and will take of fast but doit know not tomorrow

Posted by frank bruno | Report as abusive

Professor Schwab,

I have an idea, for part of the problem at least. It has to do with reducing what game theorists call “information asymmetries.” It’s a little too long for a comment though. Is there another way to communicate it to you?

Regards,
Ken

Posted by Ken | Report as abusive

john maynard keynes sounds familiar?
he didnt merely theorize but also proved his theories in practice as treasurer at his college…

Posted by roger | Report as abusive

How about using all the bailout $$ to open “NEW BANKS” I think these new banks having noting on there balance sheets “Except $ 825 B”
will loan out the money quickly so they can make more money, now the credit crunch should disappear.

Another plan just distribute the $825 B equally to all U S citizens, this should be about $2705 for each citizen this should avoid the need for a separate stimulus package and probably save billions of dollars in legal and accounting costs over the Obama plans.

Now for the corporate SO B’s & our elected officials that caused all these problems, don’t give them another cent just put them in jail for life! or 1000 years whichever one is the longest time.

Posted by Albert Pioli | Report as abusive

Well the question was how to use these communication channels to pull people in, I guess you’re doing that, Klaus, so I’ll just give a response to the problem, not the query.

It is difficult to give a blanket global approach, since the situations vary according to the nation. Mainly along the lines of debtor vs. saver nations, but you have further breakdowns of producer nations, raw material sourcing nations, and consumer nations. I hail from the U.S. so my approach will have the persepctive of coming from that culture.

A major need is to stabalize the evolving downward trend of asset prices. Stock prices for financial institutions will not stabalize until this is done, and financial institutions wont quit hording capital until this is done.

There is also the need to make sure that money spent by central banks or the public sector is spent wisely. Throwing trillions of dollars out there isn’t going to do much unless it is spent wisely.

What I would propose is a program to benefit both banks and private individuals, aimed mainly at the real estate market. If an entity can show a loss for a recent purchase of security showing lein on, or equity in, a real estate asset, then they should be able to have that loss subsidized toward the purchase of a similar asset.
This simple notion helps sop up existing inventories in the real estate market, and works to create a floor under prices, thereby stabalizing balance sheets, and consumer security.

Now another thing which must be done is a move from a debt driven economy. Even though most European or Asian economies are saver economies their economies have still been driven by debt via the U.S. economy. In order to avoid a complete unwind of the U.S. economy some healthy level of consumption must continue, this should be supplemented via the public sector while a move is made not to loosen credit for consumers, but to encourage savings by consumers. The traditional move to do this would involve raising interest rates. The needed level at this point would theoretically be modest given the low rate of inflation, and the generally depressed level of currency markets. Such a move also works to insure the currency reserves of other nations, since if saver nations can hold interest rates lower while the U.S. moves toward higher rates the dollar strengthens.

It is important to recognize that it isn’t a case that banks aren’t lending, they aren’t lending to risk, this isn’t something we should work to change. It is also important to differentiate between lending to indidviuals and businesses, capital for business operations should not be constrained.

When an economy has leveraged 50 + trillion dollars from 1 trillion dollars & it’s time to pay the 50 trillion dollars- which, by the way, never really existed, then words like sustainability lose meaning.

We are in the midst of a crisis created by man-made institutions–Must we return to the Greeks to figure out what happens in a tragedy? And knowing that, could we stop the tragedy from unfolding during the play?

The good news? this is a paradigm shift for many human beings–religion will not save us, war will not save us, the banks won’t save us, the government won’t save us, the financial institutions that got us here won’t save us, either. Frankly, I believe these institutions are only interested in saving themselves at any cost. When the ship is sinking.. well, desparate times bring, what else, desperation.

Looks like we will have to save ourselves, after all. Seems like we’ve tried everything else, why not commit to some love & compassion for a desperate & frightened lot. If we can right & repair the ship, cooler more mindful minds will need to get us there. Good luck everybody, I will be doing my part.

Posted by Paul W. Isbell | Report as abusive

there is allways problem when the people run out money the all country go down if they got no money to spend if they are at the risk of losing they jobs they will not spend money becouse they got no money to spend so the people run the country by make them sure that they jobs is save and they in come is save so they will spend buying house buyng new cars buy anything thing they need from food up to all they needs so and the only way to do just that they system have to change right know but all this so call smart people they are not smart they brain are only daily bread they dont understand how to change the sistem all the monye in the world they can nerver stop to go down un less is new world system and less the year all this penic all gone

Posted by frank bruno | Report as abusive

I have been in the ivestment business for about 15 years and have reached a few conclusions about how we arrived at this mess and how we may be able to get out of it. First, there seems to be something fundamentally wrong with trade flows. Capital should be flowing into developing nations rather than out of them, or equivalently, they should be incuring trade deficits rather than surpluses. In the US our trade deficit in real terms grew substantially faster than our economy for many years, creating, at least temporarily, a ponzi-like scheme. Second, monetary policy makers in the US and other nations failed to act in a countercylical manner when they should have in general have put the world economy on an unsustainable path of substandard interest rates while creating price instability.

To correct the international trade imbalances, emerging countries absolutely must import more from the developed world and allow there trade deficits to shrink in the process. Currencies must be allowed to adjust for this to happen and restrictions on imports and consumption spending must be relaxed. The idea of the developed world running government budget deficits and setting interest rates to substandard levels in an effort to offset global trade imbalances is a temporary fix, at best, to what is a serious structural problem.

I sincerly hope that the real issues are addressed soon.

Posted by F. Cihlar | Report as abusive

Francis Bacon wrote that “If Usury be allowed, it is a sure bet that at the end of the game, the banker will hold all the marks.” He apparently forgot to point out that this will result in all the marks being nearly worthless, which is the state our dollar will achieve without some hard social choices about what we, as a society really value and respect. Currently, we spend more money on professional sports than on educating our children. Clearly, we value the athletic prowess of a few overpaid, arrogant spoiled brats more than we value the future of our children. There is a bright side – as the economy gets worse (and we’re nowhere close to bottoming out) – being visibly affluent will begin to lose it’s appeal. Right now, unemployed fathers are beginning to despair. Some will take the lives of their families and their own lives. Soon, despair will begin to fuel rage, and they’ll begin taking lives farther up the food chain. It’s just a matter of time. For decades, the poor have hated and feared the rich and the police who act as their protective lap dogs. At some point, there will be a mass realization that the incredible greed of a very few has led to the economic downfall of millions.

This is the hush before the storm.

Posted by Mark Rhoads | Report as abusive

Tell Mr. Obama to listen to George Soros.

Do not creat a “bad bank”. It will only reward the bank flunkies and it will not solve the liquidty problem.

Tell Mr. Obama to do what Geoge says: “Buy preferred shares in the banks instead.”

It will work and punish the bank flunkies for their excesses.

Michael Hogan, Ph.D., P. Eng.
Toronto, Canada.

Posted by Michael Hogan | Report as abusive

Mr Klaus, will tell you and others that the only way will sop all thes doun turn is to change system fast special in usa they dont understand what going on they think they do but they dont the cars manifecture they gone broke and those not metter if the governament give them billions dollars they still go broke becouse the system not working they only way to fix the system not only cars manifacture but the all industry is only my system and that will see they country will turn up and up this is becouse we cant compite with china so the only way we can stop all this china and asia is only my system i will tell you that china will not sell no more to the us to take all the ameicans dollars in china belive me at the moment they have the vacoom to suck the money so let the new system work the people will buy the local produce not chines only the system have to change know

Posted by frank bruno | Report as abusive

James Demidoff’s comments are very close to the real issue, along with emanon’s too. When a person can fess up to a mistake BEFORE it gets out of control, without fearing inquisitional types of actions and outcomes with a strongly mandated provision to support their moral and ethical duty to do so, AND corporations write off the fictional values for the so-called goodwill value in the transaction immediately after acquiring an asset, as well as using property valuations, which are determined in the public domain, viz. those which governments of all levels use for calculating their rates and taxes, these simple actions may overcome: the flurry of fancy, (fraudulent, most likely) financial engineering, the downright misleading (and mostly untruthful) spin-doctoring of our times, and a few other less than creditable actions from those in charge that knew better or, at least, based on the size of their pay-packets, ought to have known better; then, perhaps, future instability may be less catastrophic, human frailty for doing the unexpected notwithstanding.

Posted by Allan Cox | Report as abusive

We need to decide if we have to move away from the current system of US as a global consumer and China, India & Japan as global producers and financiers. There are the biggest imbalances lie. Ironically, to the proponents of Free Trade, this system has backfired recently as it has been practiced to its zenith in the last decades or so. The next decade consumer growth should arise in the developing countries. US should starts a renaissance of creative discoveries in technology. There is not yet any significant innovation in this decade other than internet. If American history is to repeat itself, there should be an arising innovation of historical scale to revive the nation’s economy. Hopefully, this particular innovation will be exported to the benefit of humanity as a whole, plus US can reduce its trade deficit consequently to the benefit of global financial stability.

Posted by Jeff Tan | Report as abusive

The media say we’ve lost 2.6 million jobs in the past year.

The numbers:
$800,000,000,000 in bank bailouts
2,600,000 unemployed.
At $40,000 per year, we could give every one of those people a job for 7 years, and STILL not spend $800 billion.

What do YOU think will stimulate more economic growth and stability, 2.6 million $20/hr jobs, or a giant loan to a few banks?

Posted by Mark Rhoads | Report as abusive

None of this is difficult. Information technology has shrunk the world from isolated autonomous geopolitical economic units to that of an interdependent and complex common village. Some time ago decisions were made, accepted and implemented by both world leaders, business and academia to move towards “Globalism”. What we are experiencing now is simply the affects of geo-economic mutation along this globalism pathway that eventually will force us to a true one world geo-economy. The “depth and recovery” is simply a function of acceptance for political capitulation of the old models and derivation and acceptane of the new.

Translation: Economic Depression, Social/Political re-alignment, New World Order. Think Dinosaurs!

Posted by Michael | Report as abusive

World-wide commerce has worked well for thousands of years in spite of government. In our world of instant communication governments have come to think that they know more about commerce than the rug salesman in Bagdad. The problem is every time a committee of elected officials or bureaucrats get together to fix commerce they put into motion unintended consequences that the rug salesman in Bagdad could have predicted.
Then when the unintended consequences are in motion government once again feel that they need to repair the damage. It is time for governments to realize that they created the economic mess and it is time to go to wiser heads to fix it.
When I say wiser heads I suggest putting together a committee of small businesspeople or even house wives that have shown that they can survive all of the changes imposed by government and still make a living. Have them come up with a plan to recover from the world wide economic crisis. This plan will probably include a plan for the governments to allow business to fail regardless of size and stay out of the way of legal successful business.

Posted by Marvin Crowther | Report as abusive

quit screwing the little man.

The economist Louis Kelso, deceased, along with philosopher Mortimer Adler, produced the theory of binary economics. Kelso’s work as an investment banker, making ownership more widespread amoung workers and management using tools such as Employee Stock Ownership Plans, is a beacon in the present world of skewed ownership distribution. Unless this problem is addressed, problems such as global warming and overpopulation cannot be adequately solved, for the people say it is up to the rich to do something. If we move towards ownership by the many, rather than the few, we can substantively begin to address the financial crisis at hand.

Posted by Charles Setlow | Report as abusive

The first and foremost, the leaders of the developed world should develop and adopt the systematic approach to the most important technological phenomenon of our days – transition to Alternative Energy on a massive scale, which requires forward thinking and coordinated efforts of many industries, Governmental bodies and the engineering communities around the world. Refer to the “Green Electricity (GEL) Initiative” (www.alexanderbell.us/Initiative/GEL.htm  ), which is outlining the Energy agenda for the US and for the rest of the developed world, topping the Google search list for many years.

***Alan O wrote:
It is simple my friend. Allow the USA to swallow its bitter medicine. The belief that an economy can have continuous growth is absurd. Non-stop growth is called Cancer.
***************

Ha ha … You think the USA is in trouble? We are doing fine here when compared with folks in Europe, Asia and Africa. When the USA sneezes, the rest of the world catches cold (no, make that flu) still holds true.

Posted by Hopper | Report as abusive

To begin, the root problem of all of this is in the lathargic US Congress in failing to force the SEC, Justice, and all the other bodies of government that regulate and observe violations of ethics regarding the financial system. The cause of this problem is moot at this point, as it is in our future that we must live. A strong rattling of the cages in each market is inevitible and these stimuluses are mere bandaids to help get through the troubling times ahead. The Asians and Indians and Australians jumped into a lot of markets and are eating up a lot of profit. So, the old market shares are fewer and harder to come by resulting in too many suppliers for limited consumers and thus a contraction is going to occur and as the old saying goes, only the strong shall survive. The worst thing the American congress did was to allow the auto bailout, this caused every other major corporation to lay off thousands of workers to strong arm money out of the government like the Big Three Automakers did. Corruption and apathy in the most important positions on this earth, the US congress are the problem.. and it all seems to have started around the time Nancy Pelosi became the majority leader. Hopefully the strong financial sector that is HQ’ed in SF knows this and will vote in a better Senator to represent them in the future. But, till then.. I see only wasted efforts and no real motivational plans coming from Obama.. He stated in his campaign that he would eliminate Wall Street and Corporate lobbyists from having influence in Washington, but to me it looks just the opposite. I don’t see a legitimate plan or a course of action, and I believe the whole world will be saved by the efforts of China and Japan before America leads anyone anywhere… America used it’s wealth to become fat, lazy, and stupid and acted like the huge success from undercutting other nations would last forever.. America has invested very little in itself over the past 100 years, the school system is still based on the school system of 100 years ago, and time and changes have caught up and past a lathargic corrupt system of business. The Chinese and Asian run more efficiently and are hungrier for a buck.. That is just the way it is.. And America doesn’t want to accept this reality and better educate it’s own citizens.. So, I myself will do it for my children and feel sorry for everyone else’s..

Posted by American Investor | Report as abusive

In this day and age, with the advent of the internet, advancement in technologies and the amount of knowledge it provides to us, as the human race, it should be used to it’s best ability to further implement and address issues that the entire world needs to really take a long hard look at and solve, if possible. There are a lot of very smart people, worldwide, that care about globalization and world issues as well as their own county’s issues and there are some that throw out ideas that don’t really make sense. You just need to weed through the bad ideas, look for creative ones that might work and discuss them. As everyone can see, the global economy is heavily reliant upon each other, not just financial institutions but trade as well. The U.S. has propped up a lot of smaller countries, and larger(China)economies for a long time and now the effects of a lack of consumer spending from the U.S. is trickling to other countries and you can see the effect on their GDP and trade surplus. It’s slowly going down.

The people of the U.S. need to become more educated financially or need to rethink their basic financial skills, actually the entire world does(including Governments) and spend more responsibly or at least stop living beyond our means. From a Government’s point of view, there are things that have to be done, no matter the cost, but as we are now seeing with the failure of the banking system, stemming mostly from toxic loan portfolios by major banks, the failure of Wall Street and the lack of regulation and oversight that should have forewarned us partially about the seriousness of the crisis that has now started to effect economies around the globe, there needs to be a serious cooperation effort between all the major countries on our planet and some sort of global commitment to work together or else this recession will turn into a global depression.

Posted by Damian Palmares | Report as abusive

I think what is necessary is for the industrialized nations to take over their banking systems in a coordinated, temporary action with a temporary holiday for financial markets. This would be temporary and would not involve the wipe-out of existing shareholders or even necessarily the replacement of management, and would occur under the auspices of each nation’s central bank. The banks would continue to function in day to day operations and, backed and administered by central banks, would presumably be able to open up credit to businesses to run their operations. The markets would need to be closed during this period, including currency markets.

During the holiday individual nations as well as a conference of nations would evaluate the true state of banks and markets. Governments would need to have the authority to write down or eliminate some debt in a reasonable manner. Since much of the problem has been created by over-leveraging, de-leveraging is obviously necessary and is going to occur no matter what. The question is if it occurs quickly and in an orderly manner or if it takes a long, disorderly time. As with credit default swaps, much of the debt is likely off-setting. For the rest of it, many institutions will need to take haircuts.

During the debt destruction, each nation individually but even more importantly in concert with other nations, would evaluate financial regulation. The shadow banking system (dark market exchanges, derivatives, commodities) needs to come out of the shadows and into the sunlight. Agreements need to be reached about tax havens.

This holiday period with its debt destruction should take care of the immediate crisis. After the holiday period (3 months, 6 months, 9 months), the banks would go back to their shareholders and markets would reopen under the new rules and regulations with public exchanges established for the shadow banking system (and stiff criminal penalties for any attempt to sidestep the public exchanges).

Then the nations should continue to meet to work on Basel and international accounting standards, currency trading, the role of private auditors and credit rating agencies, and other issues of international systemic importance.

In addition to this financial work, the nations could also work on ideas to increase global economic growth which have more lasting benefits than mere consumerism and dicey financial innovations. Global energy, investment in developing economies, and improvement in global healthcare are promising areas that could provide both economic growth as well as long-lasting benefit.

Posted by JMV | Report as abusive

What’s the point? Big business and its government lackeys are bankrupting us all and ruining the planet – a trail of wreckage – economically and environmentally. We’re only short of World War 3 and we’re about finished.
Thank you.

Don’t spend more than you earn. Pay in cash. Create a budget that allows for savings. Help your neighbor. Works for my family. Will work for the world. Yes, it really is that simple. Growth would be slower, but realistic. This will always be the best system. Ocham rules.

Posted by Capthappy | Report as abusive

When oil prices spiked last year, apparently indicating a shortage, people and companies around the world did exactly what they were supposed to do: they started to cut usage.

This is like being becalmed in pre-steam sailing vessel; it is logical for the passengers and crew to cut down their food and water rations so they will last longer.

Just as cutting rations would have been good for the becalmed ship and its mission, so cutting down petroleum usage is good for the planet. Reducing fuel usage tends to reduce global warming, and also helps stretch out our finite supply of petroleum.

One who is concerned about the health of the planet and thus ultimately the health of the human species would logically be glad to see petroleum usage dropping.

Unfortunately this reduction in fuel use was bad for business. It triggered, in effect, a run on the banks, and those with a lot of bad assets began to fail. In a cascading, self-reinforcing reaction, money became tight, businesses could not roll over their debts, and the whole banking and investment system seemed (and still seems) to be in danger of collapse.

Thus we see once again that the planet’s needs are in very direct conflict with people’s everyday requirements for having a job and consuming food, electricity, fuel and so forth.

The above leads me to conclude that we have to modify our economic system in such a way that it will not punish people and societies for doing the right thing for the planet. When a company’s revenue decreases, usually some of the employees lose their entire job rather than taking, say, a 50% pay cut so that everyone can keep their jobs. One might think the pay cut would be the best way to proceed, but that would require a lot of cooperation from both management and labor and is not going to happen very often (though it has happened in the auto industry recently).

Instead we have to count on a lot of job losses, which are already happening. But the people losing their jobs still have to eat and heat their houses and so forth. Without jobs they will have to be given either money or some form of scrip. Giving away money is inflationary, so taxes would have to be raised to get that money back out of circulation. Alternatively, the scrip could be good only for one use.

I think it should be clear at this point that either significant industries such as food producers will have to be nationalized and operated so as to accept scrip and then destroy it, or else the government will have to create significant new entitlements and also raise taxes.

I suggest that nationalization will ultimately arouse fewer passions, and therefore should be chosen over the detested “tax and spend,” which has become a caricature of supposedly bad government.

Forget the bailouts and go straight to nationalization.

Solution for the US:
Bring the power of money creation back to The People.
1.In addition to Legislative, Executive and Judiciary branches of government create fourth Monetary branch. Nationalize the FED and make it part of the Monetary branch. In order to insulate the Monetary branch from the temporary shortsighted goals of the Executive branch it should be organized in a fashion similar to the Supreme Court. Monetary Board should decide on a monthly basis on the supply of INTEREST FREE money with a primary goal of maintaining price stability. Issued currency should be part of income side of the federal budget.
2. Abolish Fractional Reserve System. In order to prevent banks from violating this law banking institutions should be divided into two groups (at least):
a) Depository Institutions – would be allowed only to collect deposits and prohibited from lending. Would collect fees for maintenance of the checking accounts. Individuals with excess cash deposits could purchase Money Market Bonds from the Lending Institutions if they wanted to invest their money. It would eliminate the risk of run on the bank.
b) Lending Institutions – would issue Money Market Bonds in order to obtain money for lending purposes. They would make money on the spreads between the interest they pay on the Bonds and the interest they receive on the money they lend. Money Market Bonds would also be traded on the secondary market.

In a long term this would create very stable financial system, it would also reduce national debt, reduce taxes, increase savings ratio, maintain price stability and allow people to securely save for their retirement without being exposed either to the risk of inflation or market collapse.

Posted by PwlM | Report as abusive

Float the YUAN! No large economy gets to manage its currency.

Posted by Ken Marangue | Report as abusive

@PwlM
Ownership restrictions should also be put in place.
Lending institutions should be prohibited from purchasing shares of Depository institutions and vice versa. One entity could not have more than 30% or majority stake in Lending Institusion and Depository Institusion at the same time (lower % applies)

Posted by PwlM | Report as abusive

The first question I have that no one has asked is “If trillions have been lost, where did the money go?”. Somebody has surely made a gigantic profit somewhere or alternatively the loss is a perceived one rather than actual.

Since no one has apparently profited in these last few months, something is wrong with the numbers.

There is 2 main issues to take into consideration

1) Assets v Debt;
Institutions near to redefine debt that is presently marked as assets on the books. Accounting Standards should be revised!
2) Valuation of same;
An asset is not valued according to it’s “face value” but rather to its demand and thus “fair market value”. “Fair Market Value” has to be redefined for all assets and it can be done by effectively wiping out the “perceived” value of the assets to leave behind the actual “Fair Market Value”. A 30 year Zero corporate coupon is nothing more than a bet and as such has only value when redeemed at term. It should NOT be on the books as it’s future full face value.

Banks should no longer be “Financial Houses”. “Deposit banking” and it’s associated services should be clearly separated from ‘Investment Banking” operations.

Bailing out Banks is not a bad idea as long as the bailout is to protect depositors. Shoring up a bank’s failed “Investment Banking” division should not be tolerated.

A Global stimulus package should be agreed by the G7. This package should be for “food production”, “Energy production”, “Water purification and Water Management”, “Transport and Communications”. All of these could easily be for third world economies. Food production would include paying “Premium” for food produced (rather than cheap pittances because of perceive poverty). This would encourage peace, production of food v drugs, cooperation and a return to the land for many. Energy Production would be in any form that suits the environment (eg: Solar for deserts and the equatorial belt) and together with new delivery infrastructure would provide wealth for developing countries and power for the users. “Water Purification and Management”, desalination and water filtration plants to recycle water and provide for ythe growth of food and sustenance of population. “Transport & Communication” infrastructure of communication would allow for quicker response to armed conflicts and improved transport infrastructure (eg: roads and rail in Africa) allow the quicker and free movement of goods and resources. For Developed countries newer transportation alternatives (such as better rail in the USA), trams, subways etc, as well as electrical outlets for distribution of refueling power to electric vehicles of the future.

In The US, a complete revamping of laws pertaining to Lobbying should be looked at. This would remove many of the obstacles that would allow growth against the present system which effectively is no different than monopoly in a different coat.

Posted by John Prince | Report as abusive

The real answer to this problem is the recalibration of home prices AND the associated mortgage debt. Mortgages need to be reset to principal values appropriate to the new realities of the marketplace. Its not enough to simply reset payment terms. That does nothing to assuage the perceived loss of wealth inherent in a severely depreciated asset. If that perception remains, the holder of that asset feels so encumbered, that the spending necessary to revive the greater economy will not occur. Furthermore, the necessary liquidity of real estate assets cannot be achieved and so the market continues in a sort of slow motion mode of operation. Indeed, since the sale of a depreciated home immediately triggers the realization of catastrophic losses, home sales will continue to lag any other improvement in economic conditions. The home owner becomes analogous to an Aids patient with the disease imperfectly controlled. All decisions are made within the constraints of the potential catastrophic relapse(a forced home sale with its associated catastrophic loss). It may be possible to re-write existing mortgages together with a provision for windfall profits due to a sudden acceleration of home price appreciation, but this should expire in a short period (say three years) and the home and any subsequent appreciation should be relinquished to the homeowner. This would have the effect of preventing speculative pressures from re-inflating another housing bubble while allowing the return of necessary liquidity of residential homes so vital to a vigorous real estate market.

Posted by Indrid Cold | Report as abusive

The leaders must first really desire the input from the community; not just pretend they do. They must show that good ideas get implemented. It will then be a simple matter of opening web sites to suggestions.

Posted by Steve Emig | Report as abusive

Professor Schwab, It’s all about power.
The financial crisis is a result of the accumulation of extreme wealth in the hands of too few individuals and corporations, which gives them excessive power. Unlike democratic governments, they are neither accountable to the people nor representative of them: with very few exceptions, they act only in their own interests. They are more powerful than governments and so, by extension, the people. Their hubris leads them to take extreme risks with other people’s money. My solutions would limit the power of individuals and corporations and include:
1. Limit the size of companies by splitting up huge corporations (the US Supreme Court split up Standard Oil into 34 companies) and stopping large takeovers – for example, the US should have 20 auto companies, not three, and it doesn’t need megabanks like Citibank, Freddie Mac or Fannie May. Downsizing will encourage competition and innovation, and help prevent collusion: in a recession it will mean that no company is so big that a government can’t afford to let it fail. (Downsizing companies may result in some inefficiencies like more jobs (who’s complaining?) but the net payoff will be huge.)
2. Limit paid board positions to one per person, which will redistribute corporate power.
3. Limit salaries / incomes to $500,000 per year. I’ve met the people at the top and they are no smarter than you and me, and most are dumber. Don’t believe the nonsense that they are brilliantly clever and deserve whatever they can get: they don’t deserve or earn salaries that are multiples of hundreds of times average wages.
3. Limit personal wealth to say $5 million. Massive wealth leads to feelings of invincibility, hubris, extreme risk-taking and poor decision-making. Nobody needs massive amounts of money except to increase their power, and our objective should be to limit individual power.

Posted by Michael Gardiner | Report as abusive

The current economic situation is cleary a complex problem with many causes. China and Russia are standing up and blaming the United States; however, it is unfortunate that China has forgotten that it’s trememdous growth is a gift from American businesses and consumers. The thanks USA receives from China is an enormous trade deficit which is a measure of American job loss and depreciation of the American standard of living.

Globally, trading partners look at markets and attempt to make them “open”; countries with import tarriffs and barriers are targeted by trading “partners” until the barriers are removed.

Unfortunately there is only one true open market and that is the USA. All other countries have subtle regulatory, business, intellectual property, and even cultural (spending mentality, zenophobia, etc) barriers that result in token imports. How else does one country end up with a trade deficit measured in trillion dollars with it’s alleged “trading partners” ?

My question is, at what point will the world wake up and realize that America cannot employ the world?

When will we realize that import tarrifs are appropriate to prevent economic diasters? We normally only see the negative, the lack of choice, the support of laggard industries, while we don’t see the mass exodus of local jobs that support each other and government.

Until the world is completely flat the USA needs more hills.

Posted by Mac | Report as abusive

The massive executive salary increases we’ve seen over the last 10 years – justified on “performance” – now needs to be reversed (based on under-performance?). It’s simply unsustainable for these salaries to continue being paid in the new world.

Posted by Rob Mac | Report as abusive

it doesnt help to setup a bad bank to contain the bad debts. solution is to let them go chapter 11 and each hsehold will have one hse then so many hse.

Posted by colvis | Report as abusive

Create worldwide rates for taxation of carbon and other greenhouse gases, so that countries would agree to move close to the benchmark rate within two years.

The tax should be a sales tax, not an excise tax. A sales tax tends to stabilize prices and discourage volatile speculation.

Posted by Tom G | Report as abusive

By asking the right question like why are you Klaus Schwab, hardly a household name in the grand scheme of things , practically the only one at Davos asking how new technology can be used to really democratise the political decision making process at every level .

I’ve thought about why we arent using new technology to radically democratise and share the political decision making process a lot since the net took off so have the politicians in the country I live in , the UK, as most Government websites here have ‘designed out’ any meaningful participatory interactivity as have most other Governments and lets be honest here Klaus, politicians simply dont trust the people who vote for them and there is a long history of this priviledged political prejudice. .

In his Speech to the Electors of Bristol in 1774 Edmund Burke set out the position of most politicians making a good living off their craft today when he arrogantly stated :

“Your representative owes you, not his industry only, but his judgment; and he betrays, instead of serving you, if he sacrifices it to your opinion.”

We should be looking at how new technology can be used to rid the world of professional politicians and stop fearing the judgment of all.

The most important question to be asked is why there is no sign of improvement even after Trillion of dollars were poured by different countries?Where is the money going?So,somebody,some individuals,some corporates,some countries are making billions while the rest of the world is suffering.
The world is pouring money without knowing what & why it happened and without understanding what is going to happen.As more and more jobs are lost worldwide,there will be more defaults in individual loan payments.This will lead to more banking default.These will also result in lower sales,pile up in inventory and Corporate bankruptcies because companies require Working Capital and continuous drop in sales will eventually force them to declare bankruptcy.This will also lead to lower revenue generation for Governments because there will be lower Income Tax from individuals due to loss of jobs, lower Corporate Tax due to lower Net Income ,lower Customs & Sales Tax due to lower sales and production and lower investment in the country.
The whole problem was started by USA because of greed.The same people were rewarded who created these problems.The World is suffering because the Whole world just followed the same US Financial Model.So when the Model itself was proved wrong in USA,the same problem surfaced in all other countries at the same time without giving any time for action.

The wayout is to Write-off all Derivatives Products losses,start from scratch from Zero.Stop trading in Derivatives for next 2 years.Make Automated Trading Limits ,the moment it is reached, no body will be able to breach it even with the permission of MD or CEO.Write-off all bad loans or revalue them to only Principal.
Nationalise all Banks,Mutual Funds, put a limit on the no of Private companies that can operate in a country.Stop creating gigantic corporates like Citigroup,RBS,BOA,Sony,Toyota,GM and so on because as you grow enormous in size, it is next to impossible to manage those socalled no-fail organizations.

Stop using all these nonsence advanced Risk Management tools like Credit Risk,Market Risk like VAR,Interest Rate Lisk and Operational Risk because they are “cause and effect” and all are interlinked.No one can predict when a person will commit fraud in a company even though he is an honest person & is forced to do so in order to survive because he has no other source of income and all his efforts to get another job failed.This is a Operational Risk which emanated from the sudden Market Risk faced by the company, that too, due to non-payment from third party.

Posted by CHANDAN KUMAR | Report as abusive

“There is nothing new under the sun” All that is happening now has happened before, maybe on a different magnitude, different places but nonetheless it got solved eventually, so my outlook is very optimic for the long term…but then in the long term all of us will be dead.
What I think is key to get out of this mess is not to forget we are humans, unfortunately more prone to vice than to virtue, so we need laws ,institutions and checks and balances that can look after the common good.
My feeling is that in the specific case of the US most of the institutions have gone corrupt, not attending for the common goood but the private and very short term one. Some examples: Health care costs skyrocketing because of incredible ($$$$) verdicts of malpractice where there were only accidents. DEA unable to find tons of drugs smuggled into the US, just petty merchants. A governor selling a senate seat. A executive using a million dollars to remodelate its office. A mayor building a bridge to nowhere….

My advice to the world leaders would be to revitaliza institutions, legislate to make corruption a crime even worse than malpactice but… make sure that it is unlawfull to provide corruption insurance.

Posted by Maria A. Palacios | Report as abusive

There’s too much fiddling with the people and institutions that got us into this mess in the first place. True the people may change (as in the Obama Cabinet) but their modus operandi is disturbingly similar (see Geithner’s simplistic tirade at China; just sad, sad, sad).

My suggestion is start with the end in mind; what is the best case scenario and what is the most realistic scenario (not always the same thing) and then work backwards. Pumping money and inflating the economy a la Krugman (who’s really starting to get on my nerves) is pointless without some idea as to the end objective. The US cannot be a 0% interest rate and tax rate economy forever. The sooner this is admitted, the faster confidence can return and start the process of rebuilding.

Posted by Steven Wong | Report as abusive

One way of infusing the wisdom of democracy into political & managerial processes is to, on important issues (especially), limit the role of leaders/”deciders” to that of formulating approaches, legislation and options, inclusive of propositions from those affected. Constituents would then vote to ultimately “decide” what will be adopted.

A successful leadership process would then ideally be one that best explores the issues at hand and correspondingly focuses itself upon selling what it thinks are the best solutions, to their voting constituents in order to win respective votes for approval.

It seems that power is now too concentrated in the hands of too few individuals where voting is almost too important a tool to be left solely in the hands of individual leaders, often compromised by self interest.

Properly encrypted internet communications and voting can make such a voting rich process as this accurate, efficient and auditable.

Posted by Daniel Steele | Report as abusive

GO “GREEN.” The planet is so poisened that everything our government does should be directed at creating clean technology and clean environments. This would create new jobs and perhabs new sectors. It does us no good to have an economy if the environment is destroyed, money is then worthless. In emergency health care we say the ABC’s when a patient is dying. Airway, Breathing and Circulation. All of these earthly process are impaired, therefor, it will take EMERGENCY MEASURES save ourselves and whats left of our clear cut, poisened, toxic, and chronically disabled world. Going “GREEN” is our only hope. This means eat fruits and vegtables only, stop deforestation, recycle everything and stop green house emissions. I’m doing my part are you doing yours?

Posted by Robbin Flowers | Report as abusive

OK it’s time to become conscious. The old way has reached it’s peak and the house of cards is falling. No blame needs to be placed on any country or group of individuals. We are all to blame if you need to know the truth. What we have to do now is insure our food supply continues to grow. We must clean up our water and air. WE must start listening to those who have alternative ideas for energy. The economy is broke so there will be no harm in using free energy and other inventions that have been suppressed for years by electric and oil companies. You can also include drug cartels in the grand scam of things. It breaks my heart that we have all this technology and can’t seem to use any of it for the right purpose. I do not believe that the people of this planet have any idea of the possibilities we have as humans to live peaceably and in abundance. It is time to start acting from our hearts and not concerning so much over bank accounts. Stop pointing fingers unless you are looking in a mirror. When you do something that is wrong, you know it. So,don’t do it. Change is coming. There is no stopping it. Which direction shall we choose ? A plan that will work or the chaos that is coming?
Get rid of the dependency on oil and end credit. All the other problems will be solved. It’s THAT simple. Think about it!

Posted by Jerry P. | Report as abusive

Dear Professor Schwab,
Fixing the current problem maintains the original causes that brought the economic problem into existence. I suggest that DAVOS concern itself and its resources with designing sustainable social institutions, which would include a sustainable global economy. When one begins to work on designs for a sustainable global economy, one soon discovers the elements of our contemporary global economy that work against us, today.
Thank you for asking the audience for suggestions. //Sincerely submitted, Daniel Raphael, Ph.D.

We have allowed our leaders to completely violate their
responsabilty to control the banks and treasuries audits.
They loaned monies without proof of ability to repayment
and now they are walking away without any penalty. The monies are somewhere and should be found. If we are to allow these so called “stimulus” packages to go through
then we are just a short time away from complete failure
as a nation of “Laws”. Let the rule of “Capitalism work.

Posted by Clyde Preston | Report as abusive

I would like to add that I am (and have been) contemplating this very question. My plan is to start a web site for people of the world to unite. People who are open to the idea of a world that cooperates in unison. I believe that there are enough people in this world who would like to see peace everywhere. I think there should be freedom for all to experiment with new ideas that would benefit mankind, regardless of current laws and restrictions. It’s my life and if I wish to undergo a new medical procedure that may benefit all, then LET ME DO IT. There should be 1 government to oversee the world. And it should be protected from the influence of nations, corporations and bankers of the world at all cost. There should be 1 world currency. We should all be equal and have a chance to build a good life and family. This website would block all negative input and forgiveness would be the key to change.

Posted by Jerry P. | Report as abusive

Dear Klaus Schwab
Thank you for asking for input.
The biggest problem is the fractional banking system that we all use and which has an inherent mathematical flaw (no provision for interest) which leads to intermittent crises of boom and bust. Kenneth Galbraith came close, but the controls used in emergency do not work in other conditions.
Correction of this is a task for better men than me.
Trying to get out the current position will happen,but more slowly if large sums of money are given to banks which have no way of repaying the money or to those who have demonstrated no ability to take the sustainability of life on earth into consideration. Unfortunately this is the current game plan.
The money should be prioritised to developing renewable energy, public and rail transportation, sustainable agriculture and retraining those abandoned in rust belt industries.
I wish you good fortune in your goals.
Iain Cleator

Posted by Iain Cleator | Report as abusive

Let capitalism run its course. Do not reward those who make bad financial decisions.

Posted by Moody | Report as abusive

-accountability
-complete business/gov’t disclosure of all employees past practice with records posted on specific website having public access
-one common base currency

Posted by K | Report as abusive

To protect any future collapse of large companies, I have some ideas:

1. Country/gegraphy business wise share trading/listing. e.g. Citi Group’s USA shares/stocks only related to its USA portion’s business, not global business. So, There should be differ Board of Directors & management for each region.

2. There should be central Board of Directors which will consists of representatives of all regions as well as regulatory bodies.

3. Every company must maintain minimum lequidity (risk weighted) with Central Bank’s.

4. Stop Treasury shares (buying own shares) or any sort of Trancations with company’s own shares

5. Simplification of VAT & Customs Act.

Posted by A.K.M. Fazlul Karim ACA | Report as abusive

The very first thing you need to do is to educate people about what the problems are. Create a free “for dummies” type of overview. This would include background material such as basic economics tracts translated into the each of the UN’s six official languages as well as advanced overviews of specific problems.

By educating us about how economics works, you will produce more intelligent feedback and you will also help garner support for solutions that are chosen. Additionally, by just sitting down and setting out the problems clearly and concisely, you may help yourselves see them better.

Also, while you work regularly with these issues, most of us read about them once a year if that. How can I possibly give an intelligent suggestion about economic problems in southern Asia, in eastern Africa, in central Europe, or in the northwestern U.S.A. if I do not know what the problems in fact are.

I suggest a central, free website which sets forth the things I’ve suggested above (and other things as well), and which makes use of existing social networking tools for marketing and video sharing websites for instruction and communication. Thank you for your time.

Posted by Michael McLaughlin | Report as abusive

My humble suggestions are,
1. Force all tax heaven countries(switzerland) and islands (kayman etc) to disclose names and amounts of deposits of their clients , confiscate them and give that amount to RUN that country.
2. Discourage weapons production by ANY country.Take penal action including severing off relations.
3. Encourage food production and water conservation.Give incentives.
Many points come to mind but later.
Vipul Lashkari from INDIA

Posted by VIPUL LASHKARI | Report as abusive

Hello Mr. Schwab,
The current economic crisis is a concern to public and private institutions because it illustrates what happens when incremental groups of people disengage from the universal practice of monthly payments. The origins of cyclical payments for rent, food, credit, transportation, medicines, taxes, insurance, and utilities created an unsustainable equilibrium.

Posted by Jim Carlin | Report as abusive

Well, Klaus, the Readership seems long on platitudes, (next up, a New -Age Ideologue? ); so generally – speaking, good luck; otherwise before some ‘solution’, as available – how about some (open) “conventional -wisdom” from your home -boys of the simple(?) – mechanics of what actually has happened in the ‘flow of funds’; perhaps an inventory of some of the other scary financial – instruments that may implode,…stuff to distinquish symptoms from the illness…does seem like an (old) textbook -something…..

Posted by j marshall | Report as abusive

(1) A major worldwide effort needs to be undertaken to reduce human population. Human population growth is the major stress factor being placed on planet resources. In the 1970s, there was a lot of discussion about the world population growth problem, but that discussion has fallen into the background. Why?

(2) We need to continue to expand space exploration. The expanses of the universe beyond the 4th dimensional limits on the Garden of Eden (Earth)will provide us with a multitude of technological advancements including much more efficient energy sources.

Posted by Sunbeam Dimension | Report as abusive

In the United States, too many tax entities have been created in the last 50 or so years. Real estate taxes have become a major problem because there are too many bureaucracies (including the education system bureaucracy) feeding off the real estate tax. I believe that it is time to completely eliminate the ability for commonwealths, states, cities, boros, counties, townships, and school districts to levy taxes. These entities cannot print the money, so the only entity that should be allowed to tax is the federal government which has the ability to print the money.

Also, we need to educate everyone to the fact that the so called “bailouts” have nothing to do whatsoever with taxpayer dollars. The fact also is that there actually is not such thing as a federal budget deficit. Even many of our elected representatives do not seem to understand how the system actually works because they keep talking about the federal deficit. They never seem to ask themselves the simple question “Who are we in debt to?” Again, there is no such thing as a federal deficit. It is all just like a Monopoly game. Not at all complicated.

Posted by Sunbeam Dimension | Report as abusive

Seriously? The answer must be in those internets.. you know, somewhere in those tubes lies the perfect solution to our economic malaise. Why doesn’t someone ask Tom on MySpace?

Posted by Rob | Report as abusive

I can’t imagine a better place and time to answer to this question that to be solved at WEF and wright now: How to identify the “toxic assets”?

Why? because it’s a first step to at least knowing how to stabilize the banking system and to potentialize the stimulus packages effect of the governments so less consequences are suffered.

Many great ideas for the same purpose (eliminate and ban bad assets) are being discused, but no one really seems to know how to identify those bad assets so these financial black holes can stop swallowing the money of the government and the trust of the investors.

Posted by Sebastian Moreno | Report as abusive

Many towns and cities in the United States have old water and sewer systems that have been pieced together helterskelter over the course of time. These old systems are constantly having to be repaired on a daily basis and are a very high expense to municipal entities …. particularly small rural towns with strapped budgets. One of the best economic stimulus plans would be to completely rebuild these old water and sewer systems laying them out with good engineering and good mapping. It might take 50 or so years to do a complete rebuild, but the job creation from such a large undertaking would be incredible. Engineering jobs, clerical, labor, steel, cement and on and on would be created. We are graduating a multitude of people from colleges with silly social service kinds of degrees and we are creating a whole system of worthless social bureaucracy jobs that leave very little to show for the social burearcracy employment. If we were to rebuild the water and sewer infrastructure, we would have something real to show for the effort when it is all done …. and the environmental benefits would be substantial as well. Where do you get the money? You just print it. (By the way, printing money is not inflationary ….. $147/barrel oil was inflationary ….. we are simply printing money now to make up for the massive inflation created by excess oil prices that were manipulated by a greedy Bush administration. Those boys took so much money for themselves from the world population that we have to print more for the rest of us.)

Posted by Sunbeam Dimension | Report as abusive

Dear Mr. Schwab,

I believe we need to have children, families,and the most vulnerable people at the centre of all decisions of government and business. Attachment science (the neuroscience of early childhood development and the neuroscience of trauma for any human being of any age) and the “social determinants of health and recovery” are the two key sciences that help create intelligent, loving and creative human beings and communities.

Once we have some “emotional intelligence” happening in communities where there is adequate social infrastructure, then and only then will we truly be able to make wise decisions about the natural environment.

When economies are disconnected from the children and the vulnerable then we will pay dearly. Fear and violence grows, addiction, etc. Although money seems to be the answer to everything, in the end, we want love, belonging, to be valued, to have people that will take care of us when we’re sick or dying. To have true prosperity we need to know that we are powerful and vulnerable. True security lies in loving relationships and a sense of magical connection to our lives, our spirits, with meaning and purpose.

Maslow’s hierarchy of needs says we must meet people’s basic needs first before our most creative functions can develop. Poverty often means living in crisis, severe anxiety and distress.

The very very wealthy seem to find ways to not pay taxes. We will all benefit if we can understand attachment science (see “Why Love Matters” by Sue Gerhardt) and the social determinants of health (see the World Health Organization “The Solid Facts” on the social determinants of health, google that and Sir Michael Marmot’s work).

Thank you for this opportunity. And enjoy Davos. It has been many years since I was in Davos. Gruesi to the Swiss folks and Auf Wiedersehen.

Posted by Shannon Lavell | Report as abusive

The likes of which I hope I never see.

Posted by Damian Palmares | Report as abusive

Please disregard that last comment.

Posted by Damian Palmares | Report as abusive

Mr Schwab

The first step to to tell people not to panic because you and the governments are going to provide economic relief in the way of coupons for food.rent.mortgage payment and medical treatment where needed.The second step is to encourage employers to downsize their productivity while still maintaing the staff numbers at pre crash levels.The employers should not put people off work and where this cannot be avoided the government must pay the difference.Third step is to assist employers to get smaller businesses going while keeping original staff on. The fourth step is to regulate the banks and to encourage small community banks run for the people by the people and overseen by the government.

Posted by suzie marston | Report as abusive

Hello Dr. Schwab:

In response to your request for suggestions for potential solutions to the current worldwide economic woes, may I humbly submit the following items for your consideration.
1. Obtain worldwide diplomatic agreement to the effect that foreign currency exchange rates will not be artificially manipulated to gain perceived international advantage, which could itself destroy the world economic systems.
2. Agree that nationalization of banking systems should be avoided at almost all cost. This is to ensure that financial professionals are running the banking and insurance systems, not government bureaucrats.
3. Agree to prosecute ALL financial scofflaws to the fullest extent of national laws. This will help restore public trust in financial systems, without which there is no functional financial system, as we now observe all around the world.
4. Rescind or greatly modify the current “mark to market” accounting philosophy, which is currently garroting capitalism. Replace this with a realistic “mark to model” accounting process. Recognize that these financial instruments have value above the current 0 mark to market value. For example, real money is currently being paid on mortgages contained in boxes valued currently at $0 due to lack of trust. Use a capitalization theory to support reality of value in capital accounting.
5. Move the GOOD assets OUT of the current failed “banks” and place these good assets in new bank entities headed by competent financial managers. Let the pre-existing bad bank fail along with its failed management. This action will firmly restore moral hazard.
6. Seize the failed bad banks and timely auction the assets to the highest bidder, a la Resolution Trust Corp, 1980′s.
7. Don’t forget the rating agencies’ management sanctions for their role in violating the public trust and their pivotal gross dishonesty.
8. Set up an international settlements corporation and require that ALL financial instruments clear through this corporation. This will provide transparency and allow econometric analysis and evaluation of financial actions in areas such as CDOs, MBS, etc., for future systemic changes.

These are but thumbnail thoughts as an outline for action to restore the public trust and create honesty in this exceedingly important area of life.

Godspeed and Best Regards. The world prays for your success.

Posted by Michael Petro | Report as abusive

1: Increase benefits for those who are jobless, or in financial distress.

2: Government funded projects to increase jobs and investment opportunities.

3: Banks need to write off the bad debt, or freeze them in order to maximise the chance of repayment.

4: Pass regulations to prevent sub-par loans, and to make sure the banks keep their risk ratio correct.

5: Slap the public over the head. They have to do their part too.

6: Where is the tax dollars going? If the government is going to throw billions down the maw of the financial crisis, ask where it is going and what it will do.

7: Stop the blame game. People wanted loans they couldn’t repay. The republicans wanted a free market. The democrats wanted the lower class to have access to loans. The banks thought they were invincible.

8: This recession will end in good time, not a second before. Trying to stop it or slow it down will only waste money which could be spent mitigating the effects on real people.

Posted by Spooky | Report as abusive

Dear Sir,

For reasonable input, please contact the Mont Pelerin
Society and Professor Walter E. Williams of George Mason University. These people know economics and can give
advice to those capable of understanding.

Time is ticking.

Posted by Trude Blomsoy | Report as abusive

Great suggestions everyone.

Posted by Damian Palmares | Report as abusive

In order to solve this global crisis we need to reverse what caused the problems.

Glass Steagall or the Banking Act of 1933 was Roosevelts way to regulate the financial industry. This Law provided a stable system of finance until tampering started in 1980.

During the early 80s’ and early 90′s steps were taken by Robert Rubin,Bill Clinton’s treasury secretary to deregulate the Banks.

He, Rubin, hired the economist Fischer Black.
In order for Black’s ideas on deregulation to work, Glass Steagall needed to be repealed.

The Gramm-Leach-Bliley Act in 1999 took its place.

In order for the Banks/global system of finance to regain trust and confidence all laws having to do with deregulation such as:

Depository Institutions Deregulation and Monetary Control Act passed in 1980,

the Garn-St. Germain Depository Institutions Act deregulating the Savings and Loan industry in 1982, and

the Gramm-Leach-Bliley Act in 1999

be repealed and Glass Steagall re-enacted.

By only throwing money at the problems will NOT regain confidence in the credit market

Posted by john raaff | Report as abusive

Incentives are exorbitant and not based on “benefits to all”, just benefits to the “me and right now”. They must be restructured.

Politicians, Executives, etc– all have incentives that are almost entirely self centered, and ever increasingly exorbitant. It motivates everyone to “out do the last guy, and get more– go farther,get more faster– make more, and the ego leads them to become detached from common realities… and more importantly risks…and the last guy gets stuck as everything falls apart…and the extinction burst mentality takes hold and he risks it all usually to no avail.

Executives and Politicians must be compensated more for what they leave behind and its success as measured after they are gone…rather than the last quarterly report or election cycle. There is too much gamesmanship,not enough leadership being rewarded.

If I was President, I should be measured more by what I left behind for the success of the future..not boost everthing now and hand off the “time bomb” to the next guy.And Why should executives get an immediate lump sum bonanza based on their best/last 3 years?..Why not defer based on the success of their successors– and pay later with proven long lasting term results.. We have geared & incentivized ourselves “to boom and bust and pass the buck”– not build and deliver the future. And I don’t believe we all benefitted from Hedge fund managers making a Billion dollars a year…for that kind of money– they ought to at least “save mankind” or “build a stairway to heaven”

World central banks would do well to follow the upcoming example of the Fed here in the USA. Once deflationary pressures bring the inflation rate down below an ideal growth-fostering 2.2%, begin periodically inflating (or not) their currencies just enough to keep inflation at this ideal growth-promoting level. This will work for much the same reason that maintaining just the right PH level in a petrie dish will foster biological growth.

Watching the crisis unfold I could not help but notice that the banks were hit first by alleged subprime loans. These loans were ridiculously low in the beginning then when the ARM kicked in people could not afford to pay and started defaulting. Millions started defaulting. Banks then went into crisis and refused to lend to Businesses which started to cut back production and lay off people. When the bailout happened, banks still held back and the government was telling them they need to start lending. Consumers are scared to spend because credit terms are still too stringent and banks are being very conservative, and there is the fear of losing your job.

1. Shore up the banks with capital but make sure they continue to lend to businesses and individuals and penalize for hoarding.

2. Extend unemployment benefits so that some income is flowing back into the system. Quick retraining programs into government defense or security related jobs may help unemployment and increase infrastructure, rather than just construction.

3. Economists, CEOs, and government should work together to avoid this in the future. Banks and finance institutions should be better regulated to avoid this in the future also.

Posted by isaac matua | Report as abusive

The world needs to consume, and consumers need to consume. For the developed economies, they need to regulate better, and catch up with financial innovations, but at the moment help viable businesses. For the developing nations it is very important to provide health and education safety nets to their societies, and have a big thrust towards microcredit to ensure consumption starts at the grassroots.

Posted by Vivek | Report as abusive

1) Analyse what led to economic revolution in the past – In the current scenario, I think innovation is one the best tool to create new jobs and confidence in the society and economies in general.
2) Analyse the reason that caused crisis in the past and how those causes were addressed and overcomed. The current credit crisis is mainly due to unstructured and ill regulated lending and the misuse of lended funds by capitalist to meet their greed. Best way to address could be proper regulations and investors discipline and self-education.

Posted by Hozefa Rashid | Report as abusive

History is clear on how a nation become rich and how it becomes poor. The key is 100% that of wages. High wages yields a wealthy nation, low wages keeps a nation poor or takes a rich nation into poverty. Look at India, good education and wages and it’s wealthy. Look at China. Wages rise and the economy booms. Hit taxes don’t inhibit wealth, only the ultra wealthy. National wealth requires high progressive taxes. We know all this, we just like to pretend otherwise. Right now, if Americans had not had 40 years of stagnant wages, the amount of credit would have been minimal and savings would have been high and this whole disaster would have been avoided. Low wages caused this. Join a union, you idiots and get decent wages! You have to be a true idiot to work two or three jobs to be able to live! One worker should be able to support a family. If not then the wages are to low. It’s really honestly that simple. Since Reagan American has been dying economically and we’ve finally hit bottom Demand high wages and that those responsible for this disaster lose their jobs, not yours! THEY are guilty, not you! Get some guts and demand your politicians hold those responsible to task for what they have done to America.

Posted by robert1234 | Report as abusive

It is a battle between Good and Evil people!

Greed will cause you to loose everything, just look at the Economic situation, people in the news, wars, and you rarely hear any good news.

Read the Holy Bible and let the Word of God fill your mind, heart, and soul and NOT your denomination’s man made rules!

Time is running out and YOU need to choose who you will follow God or Satan as this will be an ETERNAL decision.

The events happening now can be found in the Holy Bible as it describes everything you need to know!!!

Posted by Jeff | Report as abusive

the basic elements of life food clothing shelter should be secured for everyone. Look at the model of land use in israel and perhaps in reverse in zimbabwe. Israel produced nothing was a desolation for centuries, now it is an exporter of the essential element of food. zimbabwe was productive and went the other direction. in this period of crisis the idea of kibutz living for the displaced while we allow the bad debts to be liquidated is an option. invest in renewable water in desalization plants irrigation. get rid of central banks, give land grants to small communities to farm and raise animals. Dont let large corporation monopolise the lands and create artificial shortages of staples needed for mankind to survive. store surpluss fod and seed for days of drought and shortage, return to common sense, government need to be smaller and i fear larger dominant central planning and dread a new world order…

Posted by brian mcnamee | Report as abusive

Greenspan, in defending his actions or the lack of, against accusation that they caused the market troubles that we have now has said “I always believed if you leave the market free, it will correct itself”. Well, he was correct again, and now the market is correcting itself through a painful long process. The market is correcting all the excess and ignorance that we are/were in for many years. With all the huge spending plans and pouring money on failed banks we are hoping to put the economy “back” into the shape and status that it has before the collapse. We should let the economy change and reflect the reality of the new world. A world that is very interdependent where money, goods, and information flow so easily and sometimes instantly. A world with new giants and talents but not much equality in rights, dues or salaries and services. We should stop trying to engineer the economy and let it be a “free” market.

As for how to use all the new tools that the new information age has given us to further democratization and solution to problems, I would just point out that elections, making laws, taking decisions even for war and peace have not really changed for more than a century. ALL the new gadgets are being used/abused to further the old ways and purposes.It seems like we can always change the gadgets, but do the gadgets change human (inside)? For sure gadgets change man economically. Good enough.

Posted by Omar Minyawi | Report as abusive

Governments should create new “clean” banks with own and private funds. Then they should announce that there’s gonna be no more bank bailouts. When a bank goes broke, the Gov should reimburse private depositors and auction the broken bank’s assets. This method should provide a fast way to clean the financial mess. I believe within 6 months all banks that are sick would disappear and the world could start fresh. Most investment banks will probably go, but hey they deserve it. Others will appear in the future.
This would be like quickly removing a band aid. The pain is sharp and short lived.
The alternative is for the Govs to slowly bleed taxpayers money over the coming years whilst also bailing out other businesses and “stimulating” the economies.

Klaus, some thoughts:
Since the banks, mortgage brokers, insurers and other financial organizations in large part caused most of the problems through their own greed and excessive risk-taking over many years, let them bear the price over the coming years, even if it takes them many years to recover.
1. Let the governments LEND them whatever money is required to stablize the situation at reasonable cost, such as 2% over Fed cost of borrowing. All toxic assets should remain with the originators aka like the government walling off of parts of C and BAC toxic assets. The expertise for dealing with these failed assets lies with the banks and others who originated them and the responsibility for cleaning them up should also remain with the originating organizations. Does not matter if if it takes them 10+ years to clean up the mess. In effect give the financial organizatons unlimited loans or like a long-term mortage with time to deal with the toxic assets. If they have time to get it cleaned up they will and they should bear the cost of doing this. If they want to write all toxic to zero and in effect take out a 10-20 year “government-backed mortgage” at 2% over Fed cost to cover the entire amount of the write off then give them the 5-trillion or 50 trillion or whatever it is as a loan. Amortize the “bailout” loans and minimal interest over some agree upon time frame just like we all as individual all have to do.
2. Let the banks, troubled financial organizations, automakers, etc. start paying their employees/management at least partially in company stock. Part of the problem for investors/owners is that employees and management interests are not truly aligned with investors/owners interests. The only way to really create this is to “force” employees/management of public companies to have significant longer term stakes in the interests of these public companies. Surely there is a way to have public company employees and management maintain some reasonable stake in their own business..maybe 10% or more. Surely they would be more prudent and responsible if significant parts of their own personal weath and future was tied up in their own public company.
3. Executive compensation is by any reasonable persons standard grossly excessive for public company management. Public company management is supposed to be a “fiducary duty” for the benefit of the owners and stakeholders. In fact the reality is that public companies are today run for the primary benefit of the elite level management. Now if you are a private company that is not taking investors money, then I have no qualms about how much management/owners make..it could be a billion dollars a year/each for management, because it’s their money and they are entilted to earn whatever they can produce. However in the case of public companies..it is the shareholder’s money they are taking. Thus the solution FOR PUBLIC COMPANIES is to tax away any excess compensation. For example, set a standard of maximum Public Company compensation IN TOTAL (salary,options, golden parachute..everything) at say the bottom level of the 99% percentile of US reported taxable income. Say for example this is $1 million/year. Then if Public companies want to pay more than this to any individual…fine just make it non-deductible on their corporate tax returns. Or alternatively, use the concept that professional sports teams use of a “luxury tax” of some type and heavily tax excess public company compensation above some reasonable level. Public companies will argue that they cannot attract the management talent they want unless they can pay “excessive compensation”. Fine let them pay whatever they want so long as they are willing to pay the penalty of non-deductible excessive compensation or alternatively the “luxury tax” on excessive compensation. Maybe the luxury tax can be accumulated in a special dividend account and paid out to shareholders on an annual basis so that the true owners can benefit the same as excessively paid Public Company management and at the same time actually see the excess compensation they are truly paying to typically underperforming public company management.
4. All public companies should be required to pay at least a minimal dividend. Just the corporate pressure of having to pay at least a minimal dividend might go some ways towards getting public companies to manage for the benefit of shareholders. Public companies that cannot meet at least this minimal standard probably do not really deserve the privilege of being called a public company and have the right to access public investor funds. Perhaps companies that cannot or will not meet such a minimal standard would be better off in hedge funds, private equity funds,venture capital funds and other such risk-taking organizations as opposed to being granted the right to trade as a public company.
5. And lastly…fraud, manipulation, deceit, etc…will not be minimized on Wall Street until such time as the criminal and civil penalties are made so severe that it will no longer pay to undertake them. Just go back to the Enron, WorldCom, Qwest and other scandals and fraud of just a few short years ago. If appropriate CRIMINAL and CIVIL penalties had been handled correctly at that time or set in place for the future…then we would not be where we are today. A handful of individuals were blamed and a tiny number paid a relatively minor price. Yet the reality is that the wealthy elite who aided and abetted these and other frauds and deceptions paid fairly minor monetary penalties and yet made billions on their manipulation. Think Merrill, Citi, brokerage firms, investment banks, law firms and accouting firms supporting them, analysts, etc….all made far more than they ever paid in penalties. The fact is if Merrill, Citi, etc. Board of Directors and senior management had been held accountable and lost all their personal wealth and gone to JAIL for considerable periods of time, then we would not continue to have the what we have today. The reality is elite investment bankers, elite public company management, etc have and will continue to manipulate the financial system until such time as the penalties become so severe that it is no longer worth the risk to do so. By way of example consider murder…arguably the worst crime in society. At least with murder there are only a few hundred people possibly affected such as the families, friends, and relations. With these large scale wall street deceptions, manipulations there are millions of people affected and many in effect ruined or in the current case virtually the entire world seriously affected. Thus in my view this is many respects as bad as murder except that it now affects hundreds of millions/billions of people. And for what…just so some greedy and irresponsible relative handful of “elite” finance and public company executives could enrich themselves at the expense of everyone else in the world. The answer….25 years to life with no possibility of parole…then maybe 100 billion or so ill-gotten profits will no longer seem so appealing.

Just an investor who is mighty sick and tired of the same wall-street and elite manipulation and greed over and over again.

Posted by Corey Ham | Report as abusive

First of all folks understand VERY CLEARLY that the government has NO money. It does not provide any service or product which can be defined as wealth creation. Only YOU can create wealth in your job or business. The only purpose of government is to re-distribute YOUR MONEY. And to the purpose of wealth redistribution, government gets larger and more inefficient…. while paying its elected officials and bureaucracy a gold plated salary, pension and benefits. Now ASK yourself this about YOUR MONEY… in this crisis you or your neighbor are suffering, yet have you heard ANYTHING about government officials cutting any part of THEIR income, pensions, or benefits which the rest of us can only dream about? No, not one. Not Obama, not any Congressman, not one Mayor, no one. Think about it. Cutting the size of government 18% equals the new $1 trillion being discussed — as opposed to you and I, as well as our children, working off the debt under new crushing taxes. What do the government officials and bureaucracy care? They are looking after themselves, not YOU.

We’ve heard of the urgent need for Governments accross the globe to bail out banks in order to keep the credit marketing flowing, and yet they still don’t trust each other enough to do so. This is causing businesses large and small to fail. My question is, why can’t central Governments through schemes run through local authorities lend directly to local businesses? The initial billions pumped into banks for which none has been accounted for (US and Uk as examples) could have gone into such schemes to help local businesses which in turn could keep people in their jobs and hence boost confidence, leading to more consumer spending. I am not an economist, so could someone tell me what the implications of such a move woukd or could be? I think whilst it’s a good idea for the UK government to run the insurance scheme for the banks (UK’s latest rescue programme), they should and must stop short of liquidising the banks as they refuse to lend and rather run a direct scheme of propping up UK businesses.

Posted by Francis Abrokwah | Report as abusive

To robert1234. You say “Demand high wages” and “Join a union” which really demonstrates how out of touch much of America is with reality. You are paid what you are “worth” in a job as valued by the marketplace. You will never be paid one cent more than what you are “worth”, regardless of what you “demand”. A “union” only places an artificial limitation on the “supply” of labor, and therefore will ultimately fail if it is priced much higher than the marketplace, which always pays the REAL “worth”. If the goods or services price provided by union labor exceeds the true market price, then the buyer will purchase the cheaper of the two, and the union will fail. Take a basic economics course. “Demands” and “unions” are one of the root causes of the current problem — especially the bloated cost of government.

Dear Professor Schwab,
New communication methods such as blogging open doors to the online community but are only as useful as the content written on them. Government, in Western European nations, is widely seen as a set of elite persons whose primary interest is in maintaining their jobs. The Democratic government ideal mandates a degree of selflessness in decision making – taking a choice or supporting legislation that is better for one’s country moreso than one’s constituents. Blogging and YouTube are excellent, fairly easy ways to document the struggle many are sure our leaders face – to find that balance between self interest, the bankers’ interest, and the interest of the people who are paying the bills – the taxpayer. If one of our leaders can do that he or she may just hang on to a job

The recapitisation of troubled banks isn’t working. Governments must stop pumping endless public funds into troubled institutions. That will just destroy the public finances of many nations. Troubled banks must be allowed to declare bankruptcy, and trillions of toxic liabilities wiped out in the process.

Posted by Josetxo Usubiaga | Report as abusive

Lehmans bust, and the enforced nationalisation of Northern Rock has undermined shareholder confidence in America & UK.

Compensation for shareholders would attract investment into all the surviving banks, as shareholders would no longer face the dire threat of their investment being wiped-out.

The issue of who would provide such compensation is something else, taxpayers are already being “milked”, and other banks are unlikely to want to ever compensate shareholders of another Lehman’s

Posted by Jerry | Report as abusive

A run on a bank pretty much demonstrates that “commitment” from the banks is “one-way”.

Banks lend to business, and mortgage-borrowers in particular, giving them the use of the banks money for up to 25 years.

Depositors, however, are rightly able to withdraw all their money at short notice.

Certain measures could improve the effects of this commitment dichotomy . . . . eg the more widespread use of “offset” mortgages (tied with current accounts) would tend to make customers less likely to withdraw all of their deposit.

Posted by Jerry | Report as abusive

This is, at its source, not a financial crisis. This is, at its source, not even a general real estate crisis. Monetarism did allow it, yet Montarism does not understand it. One cannot solve, what one doesnt understand. This is the end of a speculationary Asset- value system for any Assets not carrying cash- income. This is especially Homes, individual houses and flats and this sector is big. They shrink in price also if financed by 100% equity, just this, of course does not burst.

Buying something which does not generate enough cash- flow income to pay interest and all the capital invested (incl. equity) requires for a profit that somebody else will buy it later on at a higher price while still not generating income. This requires more and more credit. As in opposition thereto, repaying from rental income would not require more and more credit.
They did finance the WRONG ASSETS. It is a giant problem, yet in its core a problem of WHAT more than of HOW MUCH. They got the last chance now to have it solved by Deflation. Any try to solve it otherwise, kills the currencies, the states and all the economy. That´s it. The choice is between very hard or horrible.

Posted by C. Vartian | Report as abusive

Sustainable annual growth is only 1-2 %. Central banks control the velocity of money and obviously they have failed to promote sustainable growth. The only solution is to go back to gold standard.

Capitalism does not work without control as it behaves like fox in a henhouse. Everything is exploited to the maximum. Now the response from governments is to reward this fiscal irresponsibility. Fiscal discipline is thrown out the window and “borrow and spend” mentality continues to be promoted as before. We simply cannot continue like this.

The change needs to start in our thoughts and minds. What are the important things in life ? Collect money ? Own cars and houses ? Buy luxury goods ? Slow down for a moment and look beyond and you realise that this is just an illusion. It is a trap where everyone is tempted to fall. The way out is to look inside. What we really are as humans and what is our purpose and goals in this universe.

Posted by Tim | Report as abusive

Klaus: I suggest that all the corporate chieftans start limiting themselves to a reasonable and fair amount of pay. For the millions of dollars saved the company can keep some of its people working longer. Looking at my example, while my CEO made 70 million dollars last year people in the firm were being laid off to the worst recession in a long time. For that 70 million a lot of jobs could have been saved, these are people who would no be contributing to the economy instead of living in despair. The CEOs have to realize that having one 14 room mansion should be enough and they should start acting like responsible citizens with an obligation to employees and society.

Posted by paul | Report as abusive

The problem started with lending money.

Why is it that we lend money from other people or organisations?

Well, impatience really.

We want something now that we are not prepared to wait for until we have the actual money in the bank to pay for it.

Im not suggesting we wipe out the notion of debt.

What I am suggesting is that instead of lenders looking for payment of that debt plus interest, that they rather look at possibilities regarding taking some sort of legal or equitable interest in that business or over the object/asset with respect to which that debt relates, at a higher percentage than what they have been taking up until now, with options for the debtor to buy out the lender at a future date with interest.

This will curtail dodgy lending to people who may need the money for some or other endeavour but cannot actually afford to pay it back and where it is highly likely that they will not be able to do so in the near future – which begs the question why give those people money in the first place? (however, see the housing mortgage crisis in the US to get a picture of how silly/greedy lenders can be by lending people money who shouldnt be lent any money).

Also, leasing should be considered as a viable alternative in this day and age as opposed to ownership.

Many people dont really need to own a house, or car, or own the equipment that their business uses.

etc

Posted by Bob | Report as abusive

Are you kidding me, asking ordinary folks to solve the mess like a world economic downturn. That’s bizzare ! Where are all those MBA’s and PhD’s…You’d have to be extremely gullible to think that a solution of any kind can be concocted by people that have no idea what’s going on if anything trying hold on to their jobs. How could they if the best brains are scratching their heads. The next Nobel prize in economics should go to the guy(s) with the best proposal for systemic change. Stop giving prizes if necessary or those given for theories that simply don’t pass the reality check. The crisis just has to run it’s course. The greatest worry though is knowing how to avoid future bubble or any kind of imbalance.The ripple effects are instantaneous and that can cut both ways. Then again there were people predicting this so don’t hold your breath for a miracle cure. There have been enough of signals to foresee problems, but not many heeded the advice. The central bankers are best equipped to use their resources and brains to coordinate changes in the system put in place controls. Most of all educate and raise the salary of the poor compliance staff to attract the best people that can manage the markets/lending/risk oversight based on common principles and market forces agreed internationaly. At the company level they need to be truly independent and not motivated by performance only. Best mandated by law. Polititians are necessary to pass the laws but don’t expect them to come up with anything.

Posted by Franz Kafka | Report as abusive

While The Economist has published a Davos-related essay called “Mountain Reboot”, I believe a Redesign (not reboot) is what’s needed. I’ve blogged about this distinction in The Huffington Post here…

http://tinyurl.com/c2dafg

The Economist thinks the existing economic system is like a crashed computer. They don’t realize the existing system is actually obsolete.

It needs to be redesigned around collaboration (not competition) and sustainability (not never ending growth and consumption) principles.

Kofi Annan, in his pre-Davos essay, writes from the perspective that the world has fundamentally changed as well.

This is what Davos’ leaders need to realize. The global financial system is not a car with a blown engine that needs to be replaced. It is a car that is now on the ocean, rather than dry land. That car must be transformed into a boat, or else all of humanity is sunk!

No, we cannot help the leaders at Davos because they obviously feel by the virtue of being at the World Economic Forum that they are part of the solution to our troubles and not the source of our problems. To whom exactly should we turn to for advice? Gordon Brown? Give me a break!

Posted by MrBill, Eurasia | Report as abusive

Lyndon LaRouche, American economist and former Democratic presidential candidate, has warned of a coming financial collapse for years, as well as providing solutions:

1. Put the U.S. Federal Reserve system, and ailing banks into bankruptcy reorganization — no bail outs, but seperating the toxic speculative financial paper from the healthy functioning of the banks, and WRITE OFF the toxic waste. Don’t try to buy it up — eliminate it.

2. Establish Alexander Hamilton-style national banks to issue massive amounts of earmarked state credit to revive the real production economy — modern infrastructure, including nuclear power and magnetic levitation trains, high-technology industry and agriculture, research and development, education, health care.

3. A four-power agreement between the U.S., Russia, China and India to initiate a New Bretton Woods international fixed-rate credit system to achieve the same goals as in #2, on an international scale.

4. Promoting scientific creativity, especially among young people, to make the breakthroughs needed to develop new technologies for the future. Wealth is generated by human creativity, not by speculative paper money.

5. To learn more, see: http://www.larouchepac.com, http://www.larouchepub.com, http://www.wlym.com, http://www.schillerinstitute.org

Dear Prof. Schwab,

Please find bellow my humble comment, why this entire crisis is happening:

1. Late’80, in USA democrats created NAFTA. This allowed US companies to move jobs out of country to low cost regions, mainly Mexico and Asia.

2. The plants started to close in US and move overseas, people started to loose their jobs…

3. In parallel to this, Hillary Clinton started to “volunteer” and “fix” the Health care system…Nothing happened…worsened…let’s see under president Obama…Universal Healthcare coverage…what a nice dream for American people…

4. Cheap Asian goods started to flood American market, the demand for more expensive American product dropped dramatically, again American plants reduced their production, more lay-offs…

5. Cheap foreign labour (very much illegal) started to invade the US, driving down the local salaries. Life in became US harder and harder…

6. By loosing their jobs, more and more people could not afford to make anymore their mortgage payments and started loosing their houses.

7. American people are not idiot! They (99% of them) know how much mortgage can afford, but they cannot control for how long they will have a job so they can the family mortgage.
As soon as they started to loose their jobs, again I repeat, they could not afford to pay anymore for the house…the crisis started to develop…

8. All the big companies including the auto manufacturers moved the majority of their plants overseas, there are not very many plants left in US, so jobs are hard to be reopened on US soil, for American workers.

9. How Obama administration is planning to create jobs it wrong: they want to create jobs by fixing holes in highways, painting bridges and repairing schools, because these “items” can not be shipped overseas…But one can not transform a healthy multiskilled working class in a bunch of low level bridge painters…there are 2.5 million people out of jobs…

10. American people became depressed; they are not used to live in conditions like these. They are turning toward right deep conservative-fundamental Southern-style religion, become violent, started to hate foreigners, immigrants, the rate of killing among them is increasing, same with the suicide rate…Very bad, it looks like there is not hope…

11. The same key people that created this mess by starting NAFTA are now back, same strategy (hope not!)

But there are some solutions…what I said above was just the root cause…

How to fix it…I will tell you more, as soon as I realise I’m not talking to the walls…

Sincerely,
bibicu_99@yahoo.com

Only the government is the logically disinterested party to act for the good of the entire population. Only the government has no self-interest. The government is not as efficient, but efficiency is less important at this time than impartial judgment and action. Given this, the best way out of the crisis is to nationalize the banks until the situation returns to normalcy and then de-nationalize the banks. Sweden did this and it worked; Japan didn’t and tried to solve the problems it had by stimulus packages, noe of which worked. The answer is gulp and nationalize temporarily. With a steady hand on the tiller of government, the usual fears of government ought to be much more correctable than the failures of the people of the people who got us to this mess. I trust Obama more than the barons of Wall Street.

Posted by Apostle | Report as abusive

The present economic crisis started with US Subprime and the related collapse of CDS market. The biggest reason for the continuation of this crisis even after detecting the same in 2007 is that the problem is not addressed at the real root level. The crisis started due to the default in payment by the people who had taken housing loans. It is imperative that to solve the issue, the borrowers should be enabled to make the payment. If tehy lose their job and put them inot more trouble, it can only aggrevate teh situation. Instead of bailing out big banks and auto companies US govt. should bailout the loan borrowers by paying their due for 3 or 6 months as a one-time measure and end the era of foreclosure of loans in USA. This can bring stability to market and the economy will definitely start reviving. The cost incurre b America for this would be much lesser than the stimulus package.

Another important lesson is that people should never be allowed to borrow without checks and balances. The limits of all individuals against credit card should be limited to their one month salary inclusive of all type of credit cards. This will have two advantages. One it would limit the losses to the banks due to non-payment 2) It would limit the reckless spending of consumers.

Posted by Benny Sebastian | Report as abusive

I’ll try to keep this simple so easier to absorb … there has been a new evolution of thinking happening for sometime … but because of power monopolies and the insecurity of loosing them a certain business formula has been used in many masks … with moral lines crossed by the likes of Madoff and other…. without expanding on the subject of holistic philosophy “go google” but there is a machination as with Tao of quantum physics and its micro macro … the One with yin – yang dynamics major and minor within 3 layers of the 8fold.

so you have the majors US – EU … minor Russia China … and G8

a harmony of dynamic economic activity is a move towards this model …. the strength of the US is in multicultural unity , a nucleus … but the failure is external exploitations and overheated growth … rather than an economic continuum returning the the public whole as one … the push shove self interest and black holes of corruption has lead to an edge of colapse … put simply find that harmony around the US nucleus the fall of empire will be avoided … we have the communication tools now and the US has a president that can listen and apply the changes … a lot of forgivness and olive branches.

it’s a mentality … as with foundations many use … the hard ball competition is still there but it returns to support the one including self … fight to win in a different way …. education :)

if anyone like to chat about the subject my email … unity_8@bigpond.com

Posted by Harry | Report as abusive

The real problem is that the current economic model is based on growth. Impossible on a finite sized planet!

Cyclical contraction of the economy ought to be seen as a goal, not a disaster! Otherwise we have a runaway system that can only end in chaos.

I suggest NEGATIVE interest rates should be introduced so that if you have capital, you use it or lose it!

Posted by Adrian Piers | Report as abusive

I forgot to mention … I feel the only way to avoid this colapse is the big traders need more small trade partner … so remove the bully monopoly mentality that has overheated and now strangled world trade … spead it wisely … techno manufacturing in Africa for EU … Sth America for US … Asia for Australasia … China for high volume … transport cost saved … ecotech energy to cut consumer costs … then oil price rise to keep them alive too …. balance and equilibrium in a complex world.

at the moment it’s still like uncivilized push and shove at everything.

but we live in hope .

Posted by Harry | Report as abusive

The people gathered at Davos need to re-establish their social contract with society and articulate that where they are the empowered individual in a social contract, how and when they will act to deliver the higher duty of care that is their responsibility because they are the trusted source of knowledge in the contract.

The best analogy I can draw is that of the Black Cabbie. An individual learns to drive and earns a driving licence. At the moment he takes a car on to the road he enters in to a social contract with everyone else in that environment, be it other drivers, pedestrians etc. That driver then decides to learn The Knowledge and after three years he is awarded a permit that means he can take one of London’s iconic symbols on to the road and engage with the general public from a position of trust.

What is the higher duty of care? If anyone reading this is a parent whose teenage children come to London at some stage, particularly if you have a daughter, you will have said : “If you get stuck late at night in London get in a black cab, do not use a mini cab etc etc”. At that moment a social contract exists between unknown parents and black cab drivers. As parents, and indeed as individuals, we rely on those black cab drivers to apply the higher duty of care in that social contract. At the moment someone’s child gets in to a cab late at night possibly the wrong side of several alcoholic drinks the human connection of the social contract comes in to play.

If you are a single woman in London you will also know that when it is dark, and often when it is not black cab drivers always wait until you have safely entered your house or gone through the security gate to your building.

That is the higher duty of care of an empowered human being and that is what all leaders need to define and decide how they are going to deploy it within the environment where they operate.

Whilst we as individuals outside Davos might see personal security as one of our highest priorities, this social contract applies equally to the issue those at Davos are trying to address. In positions of responsibility for global (and personal) funds, the question is how bankers and those within that sphere should be acting that demonstrates that they care for and feel responsibility for the money they are managing, and that they are applying the knowledge they have that earnt them a position of trust within a banking licence. Surely the higher duty of care applies all the more as it is not their money they are managing, in the way that it is not the Black Cabbie’s daughter the cab driver is taking home.

Posted by Suzanne (London) | Report as abusive

Governments should sponser development of methods of fosssel fuel replacement, which are non-polluting and renewable, especially for transport purposes. Solar, wind, wave, and geothermal methods would provide work for millions world wide, and would not need to be done in developed regions, or ones where mineral resorces are abundent. If we are to spend ourselves out of this world wide problem let us do it in a way that defeats two menaces, viz. dependence on fossel fuels and contibution to global warming.

Posted by Harold Roper | Report as abusive

Now the people of the world should really panic. Hey everybody, we’ve been using this tired old debt based system as a way pretend to increase wealth to the middle classes and suddenly we find that we’re having some trouble with it. We used to let your Governments have their own banks that forced private lenders to use the same trusted lending techniques such as requiring a 20 percent deposit for large loans such as housing but when we forced your Governments to privatise them into the hands of the minority elite we also allowed them to put pressure on tried and true lending ratios. As a consequence we let these private lending institutions lend money to people with jobs in insecure industries that are prone to economic down turns. Sadly we also watched as many Governments around the world deliberately pushed a housing and construction bubble by giving tax incentives for housing purchases. We stood afar and watched lenders use these tax incentives as a deposit even though the lenders knew that these people didn’t actually have any money in the bank. To top it off we have been allowing big businesses and corporations to buy out their competition so that they can dictate prices for their products on an unprecedented scale. We encouraged these businesses to move to cheap labour markets at the expense of local jobs under the pretense that we were creating a two-tiered system of knowledge economies and manufacturing/production economies.

We are terribly sorry for the predicament we created and would now like to ask your help in the form of ideas for fixing the problem.

Yeah right. They don’t want any help. This is called a resetting of the middle class. It has happened before and will surely happen again.

Barter assets

Mr Schwab I believe you have hit the nail on the head.
We do need to included/intergrate everybody into the soultion process.
The answer lies in this itself. To use two simple and well know paradigms to, in the most cursory way, examine & explain this you could say we need an intergration of both capitalism & socialism, but in a new and unconfined way.
To explain more throughly using these new comunication methods we could design a new paradigm in which as opposed to merely state & or private ownership of resources & capital, there begins to exist a third factor. One of neither private or state, corporation or organisation.
This new group would have one edict, to provide a base level of security & existance for all humanity. Housing, medical care, food, for the individual & community. To use this as a counterbalance to both private & state interest.
However I fear our blind prerequisite to monetary factors in ALL matters will prevent this in our current position.

Posted by Jon | Report as abusive

Mr. Schwab,

The problem lies in too much talk and little action. Alas, the WEF is a lot of concentrated power but it exists in a bubble, as the wealthy and powerful tend to do. You forget, ignore or disregard what real people experience on a day by day basis. Kilojoule for Kilojoule of output, the folk meeting up in Davos do not work nearly as much as my neighbors (and I’ll say: myself) for the money they are earning.

You have Mr. Putin speaking: Ask him why is he blackmailing Europe with gas. Find out why people have to pay for water, a human right. Why are oil companies monopolizing a global resource? Why is the third world in debt, and why are the world’s biggest arms dealers (USA, Russia, Germany, for example) not working to create a more sustainable model? Why dio the rich and powerful feel they can use up more resources than others? Why are you folk not SETTING A GOOD EXAMPLE?

As for the solution to the financial crisis…. there is no financial crisis for those who have maintained a certain humility and try to understand the limits of what is needed and what is a luxury. The only reason why the mood is dismal in Davos is because this time round some of you folk have to think twice about buying the wife a new Maybach or a second airplane. More dangerously, though, the crisis risks to engulf countries that are not that stable and where hunger could become a problem.

Once you and your companions on the Magic Mountain understand the basic fact that you cannot keep accumulating wealth indiscriminately on the backs of the real wealth creators, that is the poor, and once you begin doing something about it — and that begins with a change of attitude — then things will change.

Which brings me to the last point: Decentralization, not globalization, is the solution. Globalization, Herr Schwab, is a Ponzi scheme with labor as the currency. We look for cheaper and cheaper labor to produce cheap goods so our fat western societies can buy more. Meanwhile, energy is going up the chimney transporting all that rubbish (please look at the toy section of IKEA, “Made by Child’s Hands” should be written there, and for what? For Mr Kamprad’s greater wealth).

There is enough money around for just about everyone to have a piece of land and cultivate it, to have a house to feed a family. But huge companies like Migros and nestle and the energy companies would prefer keeping us forced to feed at their inefficient trough. And for that, they spend not millions, sir, but BILLIONS in marketing. And the more the globalization, the greater the instability on our planet.

If you do not realize that Mr. Schwob, then you are no more effective than Humpty Dumpty.

Set up a good bank and lend to the credit worthy. All else should be allowed to fail.

Posted by Froddo | Report as abusive

In addition to the previous very good comments there is a key element that after 4 months of talking about this crisis still has not been clearly seen. “Acceptance of clear responsibility”. There is talk about bankers and waste loans… and so on but nobody, neither politicians (for obvious reasons) nor financial regulators has clearly stated that the key contributor hence responsible people or institutions were ?????? so and so. Here we are, two trillion dollars later and possibly over 20 million job losses in 2009 and we the citizens and our children that actually bailed these clowns that allegedly knew better(Prudence, Paulson fix…) and were better prepared and still nobody has actually been identified or will be punished for this. Free market found its limit and is ugly, our leaders need to understand that they work for us and that one way or another they need to be accountable.

Posted by Juan Tovar | Report as abusive

I strongly concur with Michael Petro’s posting above:

January 29th, 2009 12:06 am GMT – Posted by Michael Petro

Posted by Howard Perry | Report as abusive

This one is easy: break up these multinational companies. There is no competition anymore because they are way too large. They also influence economies too much. For example, if banks/finacial institutions weren’t so large, no one would’ve freaked out when Bear, BofA, Fannie and others got in trouble.

Posted by Marc Beltran | Report as abusive

It appears that in recent years we have undergone market “corrections”, in one form or another, every ten years or so. (1987, 1993, 2003…) People get slapped on the wrist, the holes in the dyke are repaired and the markets move on.

Shortly thereafter, when regulators are watching the old “holes”, some banker invents, or gives birth, a new financial “instrument”. Herein lies a major problem.
New instruments are adopted in financial markets without multi-tier scrutiny. Just because they are popular, they self perpetuate. This makes them viable but not substantiative.
This practice is probably THE most central cause of the recent global meltdown.
Instruments, opaque in nature, were being assigned values based on exchanged-added-value, not substance. In other words, because an instrument…like a mortgage…developed an inflated value based on the number of hands it got handed off to.

Value that is inherent is consistent and core. Value that is assigned is inflated, virtual and, more than often, prone to collapse.

Developing markets do indeed need new, and market relevant, instruments. However, they should all be monitored closely UPON RELEASE, have term limitations for review, and reeled in when their assigned value has grown significantly from their inherent value.
I call this the “cancer factor” in assessing a reliable-turned-volatile instrument.
When the CF is detected, the instrument’s value will have a couple of options but will, in effect, “peaked”.
The process, up until then, can be exciting and profitable, but it’s longevity can remain manageable and non-lethal.

…and so it goes.

josepbATrcnDOTcom

Posted by J Bolanos | Report as abusive

The solution is simple – monies given to financial institutions should be targeted at offsetting personal customers’ loans. Yes, that means paying-off a portion of everyone’s credit card, car loan, mortgage, etc.
Think about the knock-on of this – as the multiplier effect spreads this through the economy.
The banks will receive funding, but people will be the beneficiaries, not the government. Consumer demand will improve, and the economy becomes unstuck.
Think through the effects of this and you will see myriad benefits!

Posted by Luke | Report as abusive

While this may not fix it, I would like to see all governments make a temporary change to their tax code that forces a look back period of 4 to 10 years. Any individual averaging 8 times the national median income over the look back period gets taxed at 90% on the income above 8x median. Income derived from writing books, and patent royalties probably should be exempt.

Next, write down the interest rate on all mortgages to 1% for the next ten years, and reduce the amount due by 20% and make the new payments payroll deductions, and non dischargeable in bankruptcy.

End the manipulation of the commodities markets by the US government and its satellite investment banks.

Last July/August, this group intentionally worked to crash the oil markets, creating massive disruptions in markets worldwide. Yes, the spike in prices was unsustainable and was hurting the US economy, but had that been worked off naturally, things worldwide might not have crashed so quickly or so catastrophically.

Now we are in much the same situation in the gold & silver markets. Here prices are artificially low, and periodically nuked by the handmaidens of the US government. When the dollar begins dropping due to its deteriorating fundamentals, gold and silver will spike dramatically >>> highlighting the drop, and because of the manipulation of the markets, could rise so significantly they will induce panics, and ultimately currency runs.

The US needs to get out of the futures markets. AT this point, they are doing far, far more damage than good….and they have the potential to create an even more traumatic situation globally.

Posted by Andrew Masia | Report as abusive

gold,silver,oil standard

There really are only two workable possible solutions to the current problems and the command and control solution currently being used is not one of them as the Russians discovered. Unfortunately the bankers won’t like either solution because they relinquish their stranglehold as a result, so the chances of either solution being implemented are about zero. I guess however it depends how much desire their is to save the capitalist theology, but flooding the system with money will not work without a corresponding increase in the velocity of money. Getting money into the hands of the public is the solution, not putting ever increasing sums into insolvent banks. Few are likely in a position to borrow even if the banks put the bailout money on offer. So how do you get the money to the public without borrowing to reduce taxes?
Solution 1:-
Debt Forgiveness:- Not likely to be popular with banks and the rich and comes with a high moral hazard but hear me out. Part of the current problem is the value of paper assets on bank balance sheets. Mortgages that go bad are worth about 25% of their previous value due to loss of interest to the bank, a fall in property or other underpinning asset values when sold and costs related to dealing with the sale of those assets. In a scenario where say 20% of the principle is forgiven the loans become more affordable to service and less likely to default thus underpinning the banks paper asset values. Even in a worst case scenario I imagine that asset values would be worth a lot more than the current book values. This debt forgiveness then puts cash into the hands of large numbers of people who will spend it thus re-inflating the economy. Unfrotunately banks are like the chimp who puts his hand in a jar to take the nut and having closed his fist can no longer take his hand out of the jar and dies as a result of his greed.
Solution 2:- Monetisation of Gold
Because gold represents a threat to banking interests as an alternative currency the price is being supressed. One key issue here relates to the correlation of the price of gold to that of paper assets. The belief is that a low gold price means higher paper asset prices which banks make their money from, and vice versa. Thus the supression (don’t bother denying it)is part of the command and control toolbox. By allowing gold to find it’s own price the profits for those holding it when put back into the economy will provide sufficient stimulus to re inflate.
Neither solution costs the taxpayer any money so please stop all these cash injections with our money they will not work. Keynesian economics is bankrupt, stop trying to employ Keynsian solutions.

Posted by John Pexton | Report as abusive

Abolish the Federal Reserve and the Central Bank of the IMF start backing our money by something other than more debt! Bring the Gold standard back. Stop bringing in economic hitmen to destroy third world nations. We need to put the federal reserve into receivership it IS BANKRUPT, BROKE, BUSTED and it always has been it is a scam! The US is bankrupt and we need to start restructuring. Let these companies fail they are too big and expanded too fast with a false sense of self importance. Let the Auto industry downsize. Stop printing FIAT currency to bail out corrupt institutions. Start investing into infrastructure and put people back to work. There’s a host of infrastructure projects that need immediate attention. The answer is not a New World Order!

Posted by B Gansz | Report as abusive

Luke, you had the same thought i did. if the alleged debt crisis (mortgage, credit card, etc.) is the root cause of the problem…then attack that. treat the disease. we have now thrown approximately 1.6 Trillion $$ at the banks. that same amount of money would give every household in the US approximately $100,0000 (easy, rough math). Think what that would do if, and only if that money was earmarked to pay down credit card debt and mortgage debt??

one final issue…we give these banks money form the treasury at 1% and they are charging 25% interest on Credit cards….and they can’t make money????

Posted by dave | Report as abusive

Dear Sir,

Myself I believe we need new leaders. Leaders that no longer look at only greed and how much gouging of consumers they still can make to earn their company maximum profits. We need new leaders who are more altruistic and willing to make a contribution to saving the country (perhpas the world), helping those less fortunate, and sharing their profits for a temporary period to help shore up and activate the economy.

For example, if CEO of airline or hotel business would offer a one time reduced fee, more families could and would travel, and that would get people to travel and spend on restaurants, car rentals, gaz, entertainment etc…As long as all the hotels maintain their usual going rate policy and airlines continue to use necessary evil approach to explain their pricing policies than they will continue to loss money, and so will all the business’.

What we need is brand new leaders that are not myopic, and willing to make major changes even for a short term period to help their brotheren rather than just help themselves ! Imagine if Marriott Jr said that for the month of February, all his hotels would offer rate of $49.99 to families to help with the recession ! Wow, everyone would remember him and that chain for having actively tried to help the common folk and the country.

Even OPEC could change their imagine, if they decided to announce they would allow the oil to drop for the month of February to help the world economies shore up their losses..people would no longer have a negative impression of this organization for many years, and the low fuel prices would certainly help businesses recover.

New Leaders please apply !

Alexander King
OH, USA

Relocate the United Nations HQ from NY City to Hong Kong.

Please see my thread on the Edge Forum at Asia Times Online under China, for more details.

Kindest Regards.

I believe that regulators should force banks to create an interbank electronic exchange for the trading of risk portfolios. This would result in price discovery, price stability and price transparency. In addition, the interbank e-exchange would create liquidity while reducing costs especially Tier 1 capital requirements. The concept of “interbank” would be extended to include insurance companies. My original idea was to create an interbank e-exchange for trading in trade finance risk portfolios, especially that trade finance is Sharia compliant.

FYI. This is the hypothesis of a DBA thesis that I am currently preparing.

Posted by Paul | Report as abusive

This is the time to address root causes. We’ve been trying to focus on symptoms when the actual disease is killing us. We have one core issue: overpopulation. All else is consequential. When more people share the same assets, there is less for everyone. My solution: mandatory birth control in water and food, with the goal of a 50% reduction in world population. World government with universal health care and a social security system that actually provides some security. Worldwide reduction to peacekeeping levels for all military institutions. Martial law until these goals are achieved. Yes, it sounds like a fascist’s dream- but we haven’t shown restraint or maturity given reproductive freedom, and the tipping point is here. We do it in an organized manner or we let war, famine and phages do it for us.

Posted by Craig | Report as abusive

Are you folks serious? The hoi oligoi asking the hoi polloi via blogs to tell you what to do to fix this deepening, disasterous destructive crisis? How fey!! If it was funny we could all roll on the floor laughing.

You folks have been getting together every year, playing oracles, offering prescriptions that cured nothing. There was never a Cassandra amongst you, as far as I can remember. You are THE problem, not just part of the problem. The premise on which the system of Capitalism that you celebrate and celebrate is built is false (read this sentence carefully, it is not per se anti-Capitalism).

There are solutions, albeit not, for the most part, what’s being tried. Prediction? Matters will run their course. The hoi oligoi of the developed countries of the world, and those in the less developed countries who are at the top politically and economically who are busy selling of the natural resources of their lands, and seling out their citizenry as cheap labour (both internally and externally as “illegal immigrants” and “economic migrants” just cannot conceive of different modus operandi and modus vivendi.

There are solutions, but if people will not listen, why…..?

Corruption runs wild in both the private and public sector

Let the too big to fail, fail. They used poor judgment and do not deserve to be bailed out. The old way of loaning with loans staying at the bank and community where it originated is the way to go.
No new world order or one world money. Real competition is required to keep man honest. Laziness, greed or power needs to be held in check. Few do the right thing because of moral conviction.
The USA needs to lower corporate tax rates to 20% and cut government waste. Cutting government waste probably is needed in many countries.

Posted by Sheri | Report as abusive

Here are my suggestions:
1) Regulations in place that protect the consumer and the employee. These regulations are based on the long-term effects of abuse and mismanagement on the economy at large. We have regulations for traffic, air traffic, security, etc., all set in place to protect the public good. Why should corporations (or governments) not be held accountable for how their actions impact the public good? Executive pay, spending decisions, and management practices should be regulated by stockholders and monitored by the government, meaning more stockholder power and establishment of government audits to protect the consumer, the employee, the citizen, and the overall health of the economy.
2) CEOs who consistently demonstrate inability to manage companies, and who abuse privileges of power, should be impeached. CEOs are not kings/queens, nor Presidents; they are employees of the company tasked with the responsibility of LEADING the company in such a way as to maintain or increase consumer demand, as well as leading in such a way as to demonstrate intelligence and responsibility for what has been entrusted to them. They are also responsible for the public good. CEOs who fail to meet these qualifications should be forced out immediately, with more power placed in the hands of stakeholders, and maybe as a result of the ability for the public to lobby companies as the companies do governments.
3) Wall Street Expectations should not be what determines the direction of the company, including layoffs, etc. Economies rise and fall based on Wall Street Expectations rather than on consumer demand. Consumer demand should be what drives the economic health of a company, that demand being based on MORE competitive products and services in the marketplace, the quality of the products and services, etc. We have to get to a point where CONSUMER EXPECTATIONS, not Wall Street Expectations, drive the success or failure of companies, which in turn stimulates competitiveness, which in turn stimulates the economy. Case in point: To appease Wall Street Expectations, companies not performing well (because of bad management and decisions by executives), cut costs, and those cost cuts, as we’ve seen in the news, result in: reduced quantities of the same goods while remaining at the same price; reduced quality, even at the risk of harming people, i.e. the peanut crisis; and employee layoffs.
4) Wealth within a company needs to be redistributed among the employee workforce in a time of crisis, rather than laying off employees, which provides an immediate relief to appease Wall Street yet cripples the economy – laid off employees default on bills, are no longer able to buys goods and services, etc., which eventually forces the company that laid them off to lay off more in order to appease Wall Street, and the cycle continues out of control.

Posted by Todd Cotts | Report as abusive

Professor Klaus Schwab is right and the previous comments are all valid. Riding out this down cycle which was much overdue is not going to be easy. Leaders such as Obama are working in the right direction. However we should ask ourselves whether we wish to continue to prop up as long as we can a debt based system that fudnamentally cannot work in the longterm given that the planet has finite resources and we have a growing demographic problem that no one wants to confront. This is why this recession differs from others. Fundamentally we should be thinking about changing our value system. It is all about redifining our definition of success and puting aside the “me society”. In the longterm we are all going to have to come to terms with HAVING AND WANTING LESS. In my opinion the new communication tools are already rasing awarenes that we are all in this together and creating a wider sense of community. We should harness this to promote a new sense of global civic duty and encourage alternative media coverage as long as it is factual. An internet/TV news channel that reports on, and summarizes the daily online content of these sites would give the growing online community an official voice.

Posted by Ariane Marcar | Report as abusive

The first thing that you have to do is not purposefully ignore certain schools of economics such as the Austrian school which predicted the entire economic collapse.

I doubt much consensus will develop from some online community. The solutions are right in front of your face but the intellectual community prefers socialist solutions that put them in positions of planning. They reject sensible economic theories that out-perform their own because they do not conform to their crackpot standards of a platonic mathematical perfection. In their eyes, if the theory says you can describe it to a computer (which means they can act as such computers in positions of planning in the government) then the theory is acceptable to debate while they also drink their tea. Somehow they allow the introduction of Keynesian “animal spirits” into the discussion but only because Keynes said the government is the solution. He said that such esteemed intellectuals can engage in “demand management” as Obama’s advisor Romer argues is the reason for the stability in our economy. What could be further from the truth!?

The root causes and the solutions do not have a real voice in the debate because they are not politically acceptable or acceptable to the intellectual elite. The solution will not come from some elite group of intellectual impostors but from free functioning of the market system and the ridding of central bank price controls and inflation creation. You economists actually applauded the giving of a Nobel Prize to Paul Krugman. I question the sanity of fellow “economists.”

Posted by Matt C. | Report as abusive

Tactically, both the US and China have the same problem, and need to face it together and in a coordinated fashion. Both need to push income down the ladder as quickly as possible.

China has the savings to be more aggressive than the US., but on the other hand the US already has in place more robust safety nets than does China.

In any case, if two of the world’s most populous, and largest economies, increase wages and benefits to labor, consumption will increase in China (savings as well, but less so), and savings will increase in the US, along with consumption.

Globally, the 800 lb gorilla in everyone’s home is sustainability: The realization and response to understanding the increasing problem of finite resources, particularly fossil fuels.

A global push towards sustainable energy is needed worldwide. Such cooperation will not only help the environment, but can be an important engine for employment and wage growth.

Right now, there is a global deficit in spending on this problem. A coordinated spending program worldwide would boost economies dramatically.

Protectionism is unavoidable in this recessionary environment, but that should not stop countries from making compromises that can keep the flow of technology and production going, as opposed to being shut down entirely.

Banks should provide first time home buyers with 100% government backed loans, in 50/50 shared equity schemes. The home owners should be allowed to buy up the rest of the home, or pass on their paid up share to their offspring, who would continue to pay off the loan. Interest rates would need to be very fair and reasonable throughout the whole term, governed by law. This would help a lot of people get onto the ownership ladder, and help builders sell a lot more homes.
New motor cars should be offered for sale interest free, over a 5 year term. Millions more would then buy motors. I’ve seen dealers in the USA offer such deals – all dealers should offer this! Things would start moving rapidly if these things happened, and lots of companies would stay open, instead of going to the wall

This is humorous. As if nobody knows how this happened.

Central banks and /or governments to develop a carrot and stick mechanism that will prevent commercial banks to approve mortgages and other loans that are doomed to fail.
Banks need to ratify a ‘quality-charter’ and subject themselves to a control system. Commercial banks participating in the system will have preferred lending conditions from Central Banks.

Posted by Wicher van den Brandeler | Report as abusive

The problems are twofold:
1. GREED
2. PRIDE

So change the harts of those who control – top to bottom.

Posted by Al | Report as abusive

Yes, I can help the Davos Leaders.

What I can summarise from all the happenings from end 2007 till date in Jan 2009 on world economic front was scheduled to happen with clear intention and extremely lack of knowledge on simple economics in the market place.

To start with the King of the Kings fraud-Madoff with a massive $50 billion, everybody from SEC to FINRA and the SOX or say the AICPA or the so called auditors, all failed. I mean to say nobody wanted to work or do their respective jobs for what they had been paid for-a very handsome salary. It is a clear negligence of duty, laxity to utmost length, may be due to lack of knowledge in the field or just not doing the work.

In the 2nd place the sub prime or Citibank financial crisis with Lehman, Goldman Sach etc along with the big brothers’ like Enron and Worldcom’s early mis daventure enabling the SOX to be born, but all that are just waiting to happen. I am telling again after the posting in the WSJ that all these are not last one/ two years outcome, rather the so called economists/ analyst were doing really bad jobs since last 10/15 or more years.
Only the outcome we are able to see now in 2007-08.

So, with just two above examples I can say that the so called leaders are to work hard and work honestly. That’s all they need to do. Please put more brains and time for the economic / financial things and think long run to balance a demand and supply (not to dole out the TARP money like it disbursed $200 odd billion already to any Tom/ Dick and Harry). It may take bit time to come to a stabilize mode but would be stable as well, provided these so called Biz and Political leaders are working hard and with good knowledge base utilization.

Orelse, this year Davos meet would be similar to any other years like a paid holiday or holiday break to meet old friends who are equally with the same eagerness to see their counterparts claiming to be managing the world crowd. Cheers.

Posted by Ashok Nayak | Report as abusive

Professor Schwab,

I’m responding to the Jan 27th, 2009 Reuters online article, “Turning the Tables: Can You Help Davos Leaders?”, and I mean to contribute an observation of an economic pattern among U.S. state economies.

In U.S. presidential election years, there’s a commonly published map in which those states voting republican are colored red and those states voting democrat are colored blue. States which vote republican in presidential elections tend to also be governed by republican majorities, and states which vote democrat tend to also be governed by democrat majorities. These tendencies don’t change much over time.

There’s a correlation between U.S. state economies and how the states are governed: in rankings of the 50 U.S. states’ economies (per capita), almost all of the poorest 15 are republican (red) states, and almost all of the richest 15 are democrat (blue) states. The bottom 15 states also have the highest crime rates and lowest average education.

I suggest that economic policy on the global scale should consider incorporating economic policy elements which are common among blue states, and avoiding economic policy elements which are common among red states.

It would also be of great interest to eventually understand the actual mechanics of why “blue” economies are superior to “red” economies, so that economic policy becomes a (statistical, at least) science instead of an art.

Casey

Posted by Casey McCoy | Report as abusive

To fix the mortgage, credit and bank crisis and thereby the economy, we need forward looking changes. Government’s behavior must encourage the desired result without rules that can not be enforced. Create a new investment vehicle that guarantees both principle and interest and that pays more than the treasuries. Call it GGP, Government Guaranteed Product. When a bank makes a loan, the bank keeps 5% to 10% of that loan. The remaining 95% to 90% is packaged and sold in the market as GGP’s and the US government guarantees both the interest and principal. The money for the guarantees comes from a surcharge or a take on the interest percentage. To ice the cake, make gains tax free for two years for all involved. The banks must keep a certain percentage of each loan, in order to encourage appropriate lending. But then the bank can sell the remaining part and make money and have new capital to lend. People will be willing to invest because the yield would be higher than treasuries and their safety would be the same as treasuries. This would get the wheels turning and eventually the risk adversion to loan investment will dissipate.

Posted by Esther Martinez | Report as abusive

Dear Sirs:
I am really suprized that it is not obviuois to all of you that currencies must have an anchor in reality. Gold and silver and oil could all play a role in providing the anchor. Other commodities or items of substance in the real world, must be the basis of wealth. The idea that the US dollar is a standard never was a good idea, just a politically comfortable one at the time.

best wishes

John R. Wibel

It seemed a lot of the trouble began (the straw that broke the camel’s back?), when the subprime mortgages fell apart….and property values plummeted.

Why don’t they de-value the mortgages by a corresponding amount….say percent…rather than foreclosing?

Say $200,000 mortgage with $180,000 mortgage. Due to the economy/etc. the house is de-valued by 30% to $140,000, then simply reduce the mortgage by 30% (market value by the way) to about $120,000. Let the people continue making payments on the $120,000 loan.

EG….let the mortgages follow the market instead of remaining at the top of the “bubble”.

Posted by Reijo Silvennoinen | Report as abusive

Why don’t you just talk to Ron Paul? If countries were unable to inflate their currencies all this would never have happened and government would not be riding us like mules. Go back to a commodity standard so inflation can’t be used to impoverish the poor and middle class. After all, you can’t make money off them unless they have some to give you.

Citibank must be NATIONALIZE. Citibank can not possibly get out of the mess they are in with the same people calling the shots. Citibank must be removed from the DJIA. The DJIA committee has the obligation to remove any component that drops below $10.00 us. Citibank has remained as part of the index. Bank of America, and General Motors should also be removed. If the Fed keeps giving Citibank more money, the will keep burning it. Citibank does not know money. All that is to come isthe credit markets will remain locked, because it does not make sense for a bank to risk funds to make 2 to 3 percent return.

Posted by sam gold | Report as abusive

The basis for any long-term solution has to be education. We have ample evidence that classroom education with printed textbooks is completely resistant to effective reform. However, we also have some evidence that One Laptop Per Child and other one-to-one educational computing can transform the process. Earth Treasury is organizing a consortium to design a new generation of freely-licensed textbooks that bypass the usual textbook acquisition process. With a computer for every student, these materials can be integrated into the curriculum for the first time.

We invite Professor Schwab to discuss with us how to design and write suitable economic education materials, starting as early as first grade, perhaps with a version of the classic Lemonade Stand game or something that gives students experience, not just theory.

http://wiki.sugarlabs.org/go/Creating_te xtbooks

Firstly, focus on the right proportions more than on the numbers, Secondly, downsize your business to the point where you really control it, even if you must sacrifice certain synergies. Thirdly, stop depending on technolgy to limit the risk of third party default. Fourthly, start forgiving some debt before being forced to write off more (there is an historical precedent in the Bible). Fifthly, attract medium-term depositors so the banks can lend again. Sixthly, write off all questionable assets, (gradual write-offs undermine trust). And seventhly, explore alternative modes of transportation, housing, health-care, education, and legislation, that may be more cost-effective.

Posted by Wolfgang Somary | Report as abusive

If the US government wants to bail out the us car manufacturers with billions of dollars, then they should initiate a mandatory development and production of fuel cell hydrogen powered cars. maybe this would be costly and unprofitable ( hey it’s the taxpayer’s cash, not the car manufatcturer’s cash) in the short term, but it will eventually be cast effective. moreover, and more importantly it will 1: put a lot of people back to work in many new industries,2: decrease the reliance on oil, eliminate CO2 and other pollutants 3: create a product that the entire world will want to buy. what’s not to like?

Posted by Roger Kalter | Report as abusive

The best solution to a problem at the top is to bailout the bottom. Provide micro-loans to small businesses and farmers in the poorest of regions to modernize, even a little bit. Allow them to make more real product to sell and they will undoubtedly pay back the loans and provide the needed food for the world. Don’t bailout big banks that have screwed up the management of the top of our world market model. Make the bottom of any structure more stable and everyone higher up gets more comfortable.

1. cap for manager bonuses (eg. percentage of EGT of the last 10 years and only if EGT has risen sustainably and bonus only if same percentage is payed also to employees)
2. cap for risk premium for stakeholders (eg 2 fold risk free premium for dividend)
3. prolong term for tax exemption of capital gain to 10 years
4. promote one man enterprise and other SME founding (tax exemptions, unemployment pay, state guarantee for loans)
5. promote future core industries (nano techniques, high speed railway network, bio-energies) by loans of Federal Reserve syndicated with liquid banks partly with state guarantee)
5. govermental foundation of a good bank as competitor of established banks to finish the credit crunch (with the possibility for private investors to hold deposits with this bank – $ 20 bn of equity would create more than $ 200 bn of loans to enterprises)
5. change of mark to market valuation of assets in IFRS and US-GAAP (cap for positive revaluation due to the sector and portioning of revaluation over several years)
6. allow commodity trading (or option agreements) only for enterprises involved in the business (eg future on grain only for farming companies)
7. ban short selling of shares
8. create governmental private equity firms with the possibility for private households to participate as investors
9. give unemployed the chance to work in govermental projects of infrastructure paying them higher unemployment pay in order to stimulate consumption
10. cancel VAT for consumers for one week in february (even if good is only ordered within this week)
11. cancel VAT for consumers for consumer goods for the amount they spent more than the month before (purchase of consumer goods in February $ 1000, in March $ 1500, total or part of VAT for $ 500 can be retrieved in the annual tax return)which would cause an avalanche effect on consumption
12. increase tax for overtime hours of employees with the employers to create more jobs

Posted by Andy | Report as abusive

Dear Professor Schwab,
1)I believe that if everybody(domestic and manufacturing) installs solar panels (photovoltaic only needs light to function, so overcast does not matter)on their rooftops (paid for via Carbon Credits from Industry)then it would free up the power grid for manufacturing and transit purposes.
2)I believe that if each home can supply it’s own independent power source plus some then “Mother” can stay home and reconnect with her children.
Therefore only one vehicle needs to be on the road, and if that vehicle is electrical all the better.
3) I believe that it is all the carbon emissions that has pushed up our rates of cancer. Carbons are stored in our fatty tissue and for a woman her first vulnerable fat storage facility are her breasts.
4) I believe that our bodies and their diseases are a reflection of the conditions that are happening on this Planet right now. When we correct all the problems we have created, then will we see a miraculous remission of all our terminal illnesses.

Posted by Sharon Schaffhauser | Report as abusive

As a former stock broker, mortgage originator and contractor, I feel I have some insight into this mess we are in.

Posted by Thomas Rose | Report as abusive

My suggestion is really simple and no, it doesn’t provide millions of dollars in bonuses for the crooks who run the banks and Wall Street. Simply let we the people borrow money at 1% for the purpose of paying off our mortgage — instead of giving to the banks at this rate so they can line their pockets with it. This would solve the home mortgage crisis and give people money to spend on other things. Simple, yes? I know this is not capitalism. It doesn’t keep the rich rich and the poor poor but it would go a long way to fixing our current financial problems.
Thank you for listening.

Posted by Beverly Wicks | Report as abusive

The bankers and economists need to connect with reality. There are only two elements in human economy and our present situation clearly points to the need to adjust one of them—that is, access to resources must be expanded and those resources must be used wisely, regardless of which resource we name. This can be done by governments quite independently of any banking system, and you will note that China is already doing so. Get yourselves off the hook by recommending that your own governments follow suit. Then, go home and look closely at those initiatives within your own economies that make the best use of resources–those that offer a cyclic system of energy use and which waste nothing. Those will offer you the opportunities your nations need.

Posted by Anna von Reitz | Report as abusive

1) You must create individual wealth again.
2) The $45,000 ave. household inc. does not create jobs.
3) The 50+ year old, who was close to retirement, but
having lost 40% of her 6-figure IRA, is not going to buy anything(John Deere mower, boat, new car,…) until her retirement account is back!!! The focus should be on this 6-figure “retirement savings” class to create the jobs!
4) REDUCE HIS TAXES, so he can put more in his retirement account; and, FOCUS ON THE STOCK MARKET to get these retirement accounts up, and ….the buying will commence again—not until!

Posted by Steve, Lexington | Report as abusive

As a former stock broker, mortgage originator and property manager, I feel I have some insight into this mess we are in. There is private money out there that would be more than happy to take some property off the bank\’s hands. But, there has to be a mechanism for that to be facilitated. First of all, either the banks or the government has to be a property manager even if it is for a short amount of time. These properties should be offered on a rent to own basis with the largest rent offer prices getting the choicest properties. the details that I have worked out are too lengthy here. But this could be the equivalent to the \”Oklahoma Land Rush\” in the 1800\’s. If you offer it, they will come. The banks need these properties off their balance sheets.
Secondly, the banks have to reinvent their business models. If I mowed grass for a living and all the grass was blacktopped over, no amount of bailout would restore my business to profitability. I would either have to go into the driveway sealing business or retire to a warm climate. The banks, brokers and financial services companies need to cut themselves to the point where they are supporting the business that is there. Large banks should be broken up so that any one bank cannot damage the system. Aig, Citibank and BofA should be forced to break up. Too big too fail is a moniker for too big to succeed the capitalistic way.
Thirdly, the American public and the world at large need the major companies to take a more proactive role in public relations. To the man on the street, somebody has to pay for this fiasco. Without Joe consumer, you do not have businesses and the consumers confidence in the system has been shattered. They are not going to come back to the well if they think it is poisoned. A public relations campaign is needed where the industries that caused this problem fess up and let the public know that we are all in this together. Only drastic action will regain the public confidence. The velocity of money is coming to a standstill not from deflation but from fear. Only drastic action will regain the public confidence. We need visible leadership. Use your imagination. Davos just doesn\’t cut it. Most of my friends think Davos is a sub shop restaurant.
I am amazed that everyone says we need to get credit moving again. The US has over $350% credit market debt to GDP. Only by following strict underwriting standards will make the investors come back. So please stop saying we need to credit flowing again. It\’s hurting your credibility. Currently, there are very few credit worthy borrowers out there. Credit will naturally flow again when the clog has been removed.

Sincerely

Thomas Rose
Northbridge, Ma

Posted by Thomas Rose | Report as abusive

In this hour of global crisis, we need to focus even more on human issues in the developing world – poverty and hunger; rather than institutional issues in the developed world – financial meltdown and credit freeze.

Let us not forget how unregulated financial markets caused commodity prices for energy and grains to unjustifiable levels leading to riots and deaths in many poor countries. If there is an economic forum that aims to solve the world’s problems, it must get its priorities right. In the final analysis, what we need first is a healthier world.

Posted by Srihari | Report as abusive

I think that whole idea of helping people who could not afford houses got loans and corporation who gave bonuses to themselves on productivity and Governments who could not afford to spend spent all the money from future revenue.

Firstly those subprime homeowner should not be supported as they caused most of the problems of housing bubble not in the united states but all over the world.

Corporations rewarded the employee on the years they made money but wrote off on the years they lost money. It should have been that those who made money in corporate profit years and should have been penalized for when they lost money for the corporations instead of being bailed out either by Governments or at the cost of shareholders.

Banks tried to make quick buck and gambled and should be penalized for their actions as well.

How can a responsible Government can afford to spend money they do not have or they are not going to have in future and should be penalized for their actions as well.

I live on fixed income and I balance my budget and all the above actors should be held to same standard.

Posted by VJ | Report as abusive

I suggest world leaders get a copy of I.O.U.S.A., produced by Agora Financial in Baltimore, MD. It was shown at the Sundance Film Festival initially, and then general American audiences in August 2008, before it fizzling because it is neither sexy nor contains scenes of physical violence. The stars are the former lead auditor of the U.S. government, David Walker (Controller General), Warren Buffet, Pete Peterson (his foundation was a primary sponsor), and others with an interest in looking beyond “their watch”, to use a corporate American euphemism for the “short term” self-serving perspective.

The movie puts the 4-letter word DEBT in proper perspective, which media leaders, advertisers, bankers, builders, retailers, etc. do not want to discuss, because it would mean “living within one’s means,” a lifestyle taught to some of us by those who survived and prospered after the Great Depression. To this I would add one more element, Table 2.1 on p. 49 of “Empire of Debt – The Rise of an Epic Financial Crisis” by Bill Bonner & Addison Wiggin, also authors of “Financial Reckoning Day”; both books were NY Times best sellers. Table 2.1 lists some 50 empires of history dating back to before the Egyptian Empire (1550-1070 BC), each of which rose and then fell to ashes in its own circumstances, but always after its fiat money system became worthless through inflation and obsolence to competitive systems. Regardless, throughout human history, gold has remained the relative measure of value because it is limited in its supply by its relative scarcity on Earth.

The mess leaders and politicians face today is unfortunately, derived from failure to live within one’s means and within the U.S. Constitution’s framework, as espoused by Congressman Ron Paul of Texas. The solution he and others suggest is far “too right” of political center to have any chance of discussion in the halls of power in Washington or other capitals of government and finance which thrive on the “credit culture” of the past 100 years (IRS and Federal Reserve were created in 1913).

Unfortunately, unless America returns to the principles and practices of sound capitalist practices with reasponsible regulation based on the delivery of tangible goods and services and sound business practices (including a structured, monitored, credible debt management system), our grandchildren will inherit a deteriorated “dream” that fell prey to “unbridled greed” after the Federal Reserve Chairman, in his turn and on his watch, failed to act on his own words of warning, “irrational exuberance”, more than a decade ago.

Posted by John - consulting envir engr | Report as abusive

We must have consistency in life, in trade, in business dealings and cost of living. That means one generally accepted trade currency backed by tangibles. Yes, sovereignty will suffer perhaps, but a trade currency doesn’t mean that countries can’t trade on their regional or national currency.

A metal-backed currency will lend stability and credibility to global trade. Not easy, I know. But the throes we are experiencing now, in the US for example, are not easy either. At least a metal-backed universal trade currency would keep global trade honest. And consistent.

Peg this universal trade currency to a composite of precious and semi precious metals to prevent speculators from playing with the metals market; that which has been such a poor indicator for more than a year as governments baked metal prices to suit their needs.

A trade currency will give the people of the world choices of where to place their savings. They can, if they wish, play roulette with national currencies or for the more conservative of us in this world a safe and structured alternative. Poorly run government currencies would be revealed, and they would be forced to become responsible as large and small investors would flee the defective currency in favor of a precious metal backed currency.

The transparency would, in a word, be redeemable in metal of choice: nickel, copper, silver, gold, platinum etc. The stores of metal would be open to inspection by investors and savers from around the world. The place housing the metals would need to be on neutral ground where all the world’s people feel welcome. We can put humans in space and replace the heart of an infant seems we could engineer a safe currency in a safe place for the protection of all peoples of the world.

Such a move would be an olive branch to people of different or conflicting ideologies and perhaps we could all develop some respect and appreciation for the diversity that exists in this world. And move toward greater global understanding.

No one country or cartel would ever be in charge of this currency, but a committee focused on the health and direction of the currency. Representatives from every country with a vote from each rather than larger countries having unfair advantage in the voting process, for this currency is intended to represent all countries fairly in a completely bipartisan environment.

Representatives should not be appointed who have conflict of purpose. A housewife from the Ukraine, a teacher from China or a farmer from India and a plumber from England. A dentist from Iran and a truck driver from South Africa, for these are the people most in touch with the issues confronting their countries and consequently the world.

These people of moderate social standing are exactly the people most capable of making good and honorable decisions. They could achieve the greatest credibility for the new currency as well. No politics would ever enter this currency plan due to its unique structure. Finland would have a single vote as would Japan. All by secret ballot so none need justify choices.

We have recently seen many great corruptions from individuals with more power than understanding. I think we should take a lesson from this and apply it to all our future plans. It seems no one individual is safe from temptation—some more than others. These decision makers are so far removed from the problems they cannot conceptualize the issues hence the possible solutions are made with faulty intelligence. A permanent solution will ultimately come from the ground up, rather than top down.

Perhaps our vicious world isn’t ready for such a spirit of cooperation, but if we are to survive we must focus our attentions on peace and mutual prosperity because as a world we are as poor as our poorest person.

Where the physical facilities will come from is beyond my understanding, but I sense that most countries’ citizens are tired of the drama and disappointment that characterize the present financial systems. Perhaps Iceland would be the most appropriate location to host such an endeavor since they have fallen victim firstly to the financial meltdown and could use the help to rebuild. Warmly ccw

Posted by ccw | Report as abusive

Suggestion to help solve one problem only: If a home is foreclosed, rather than evict the defaulting homeowner, allow them to stay and pay on a rent-to-own basis to the mortgage holder (i.e. bank). Rent would be determined by a third party. That way, families will not be homeless, and houses will not be empty, leading to surrounding property values falling, vandalism, etc. Money managing counseling should also be given to the defaulter. In the case that the rent is not paid, then, unfortunately, eviction might have to follow.

Posted by VAjaybird | Report as abusive

Economists seem to forget at time that theirs is a social science. Money is simply a medium to exchange, and exchanges are based on choices made by people. To that end, we are where we are because the incentives drove the decision-makers to bring us to this point.
The world has a management problem. We repeatedly see inept management in the most key areas of our economies. And while some of this can be attributed to stupidity and politics, much of it is because of the incentive programs we have designed. If my bonus, as an executive, is paid on an annual basis, and is based on profit margin, then there is no incentive for me to invest in future product development, improved processes, or better trained labor. My incentive drives me to salvage and scrounge as much corporate value as I can and sell it as fast as I can to increase current quarter earnings.
The world needs more entrepreneurs and leaders in management positions, and fewer politicians. One solution that would help is paying executives predominantly in stock and not allowing it to begin vesting until 5 years after the issue date. This would help tie their reward more directly to their ability to build actual value versus short-term robbing of company assets.
But that’s a solution to moving a queen in a larger game. The reality is that this is the age of non-accountability. Companies and governments continue to look outside for assistance and plausible deniability versus inside for solutions. It is as if every person who graduated college in the 70′s and 80′s believes that you can litigate your way to success in every situation. That a good argument is better than a good solution. This mindset needs to change.
Our financial markets need to cease to be a game of musical chairs. There is no logical reason to allow a fund manager to invest in other funds. There is no logical reason to allow short-selling. The goal of the stock market is to provide capital investment to entrepreneurs, and allow investors to earn a return on their savings. Naked short-selling, hedge-funds, and the ilk are all simply turning investing into a large pyramid-based gambling hall.
And, finally, we need to embrace responsibility. And by this I mean that when a bank issues me a credit card they do so with the knowledge that they will eat the loss if I do not repay. Private investment firms are not regulated enough or public-minded enough to be able to effectively create and honestly market credit-backed securities. We need to cease outsourcing, not to save jobs or in a protectionist push, but because it distances the management from their results. If you can’t manage your own people, you should find another field of work and let someone who can take your place. When a mortgage company knows it will never service a mortgage that they sell, but are paid for every mortgage that they sell, their incentives will drive them to write bad mortgages. When a bank makes money on the mortgage-backed securities that they sell while using investor dollars to finance those mortgages the bank will be less inclined to care about the quality of the mortgage behind the security they are marketing. All along the chain is a repeat of the same practice, off-shoring responsibility for the consequences of choices while incentivising decision-makers to make poor choices.
How do we fix it? Create more accountability. Tie executive compensation to the future value of the company. Make finished-product companies fully liable for the actions of their suppliers. Why was Purina not criminally held to account for poisoning their food? They claim it was a supplier issue, but Purina chose that supplier. If an executive doesn’t want to spend a few years in prison, they will manage their vendors better, or develop their own processes and products in house to avoid being held at the mercy of their contractors and vendors. The same should be true of national leaders. If you aren’t willing to manage your own responsibilities, you should step down. The average Iraqi citizen does not know the difference between a US soldier and a Blackwater mercenary. And, in effect, there is no difference. To that end, the chain of command that hired Blackwater should be directly, personally responsible for the actions of their personnel. Choosing to distance yourself from your responsibilities should not provide the rewards of good management without the risks of bad management. That theme must be broken.

Posted by Grim, Washington, DC | Report as abusive

Professor Schwab,

The biggest challenge that we face as a species is not one of economics, but rather one of survival. There is a much bigger picture that our “leaders” appear to be ignoring.

We live on a finite planet with finite resources. “Global Stability” should not be about our economics, it should be about the health of the “Globe”, on which we live.

The world is in extreme peril. Every single natural system on our planet is in a state of decline. If we do not focus all of our resources on solutions to saving our only home right now, we will not have a hospitable planet in the near future. We need to place our complete attention on population control and the end of our dependency on fossil fuels. We should have responded forty years ago when our scientists told us to. Unfortunately, we did not listen then and we are still not listening now. The future will already be very different for our children. The choice we face now, is whether or not our children will be able to survive long enough to have children of their own. If we are fortunate enough to even get that far.

It is time to focus on availability of clean water, local food production and alternate sources of “clean” energy for everyone. We must take a huge step backwards, and re-evaluate our priorities.

Business as usual, is not sustainable, period.

We can try to pretend that we can solve the worlds economic problems, but it would be like putting a Band-Aid on a paper cut on your finger, when your carotid artery has been slashed.

If you truly are looking for solutions, I would suggest involving the world’s scientific communities. Focus on the disease, rather than on one of it’s symptoms.

We have some very hard changes to face. We can make these changes voluntarily, or through wars, famine and disease. It is a very simple choice really.

Greg T in Canada

Posted by Greg | Report as abusive

The solution is actually quite simple. There are only 3 elements:

1) cut taxes
2) Cut Taxes
3) CUT TAXES!

All taxes, but especially corporate and capital gains. At least a 25% reduction.

The recession will be completely over by Summer.

Posted by Brian | Report as abusive

I believe deeply that business as usual cannot extricate the world from this mess.

Regardless of the specific problems that led us here, it is clear they are systemic issues. Logically, any truly effective fix must be systemic in nature.

Unfettered capital movement underpinned by Alan Greenspans ideal of “benevolent self-interest” has failed.

We the people, need from you the economic leaders, a willingness to re-invent the marketplace paradigm. Capitalism must grow and incorporate human limitations, as well as planetary limitations into its equations. Progressives have been saying for decades that GDP does not measure quality of life, & GDP can give false-positives when for instance the bottom 50% economic bracket has DECLINED in real wealth.

The GDP issue is merely the tip of the iceberg.

We need (new) effective metrics for understanding not just “wealth” but also “quality of life”.

We need a new class of non-derivative (gasp!) investments, serving a new class of socially-oriented sustainable business activity.

We need to avoid propping up an investment bank system that has failed us, but by the same token we must avoid attempting to force or overhaul existing companies & markets. (This encounters heavy beaurocratic inertia & is startlingly inefficient per-dollar-spent)

We must allow the existing markets to continue, (yes, to conduct their business-as-usual, however badly it is failing,) UN-INTERFERED!.

We must create new investment categories for businesses directly servicing existing household/national/inter-national issues. Accompanied by an alternate set of market regulations, tax-categories, & business definitions, this is the only option I see being responsive, adaptable, & lightning quick enough to re-invent the idea of global progress.

As the spirit of human ingenuity cannot fail us, we need to create a playing field where products, services, & investment models DIRECTLY serving human needs can prosper & proliferate.

I refer to the work of Nobel-prize winning Author/Economist Mohammed Yunnus. Micro-lending, & the non-derivative business model (called “Social Business” in his books) is not my idea, & it has shown extreme efficacy in the areas of poverty reduction, localized employment, more balanced wealth increases, & systemic adjustment to a more complex world than traditional micro/macro-economics allows for.

Group Danone became the first corporation, (in partner-ship with Yunnus’s Grameen institutions) to create a multi-national social business model, using efficient micro-factories to employ & serve local populations with their nutritive food product.

If we can harness the creativity of visionary business leaders, we can walk hand-in-hand out of this thicket, & into the new millenium. Economists simply must not stand in the way of people creating their own solutions for powering, feeding, clothing, & lifting up themselves & their communities.

So good sirs & madams, kindly pave the road, then stand out of our way.

_D.Morris

1. Discharge or reassign those guilty of putting America in financial ruin. They should not be the ones in charge of the recovery!
2. Bring in expert economists such as Bob Brinker who have successfully advised Americans on individual economic strategy for a career.
3. Refuse to use the national economy for social re-engineering. That effort has been a disaster.
4. Do not spend one dime toward recovery without a distinct goal and absolute accountability.

Posted by Doris Taylor | Report as abusive

The time has come to redefine wealth in much broader terms. Let’s look at wealth as coming from four P’s:

1. People
2. Profits
3. Planet
4. Potential (this needs a bit of explanation)

Today we tend to use a single profit based measure of wealth, and make minor adjustments for the other variables (e.g. workforce, sustainability). In the future all four P’s will need to consciously play out when we make the decision on a project or an investment. It may seem helpessly complicated, but there is a way. To follow along, let’s spend a moment on perhaps the most important P of all – Potential.

Potential stands for the inherent possibility in our environment, our society and our human creativity to build a future for ourselves that is far superior to the one we now find ourselves in. Potential is JFK’s statement about the man on the moon, multiplied a billion-fold. To where our human potential not only permeates our planet, but finds its way to the moon, other planets, and far beyond. It is about finding our civilizational destiny, and galvanizing the entire ~7billion humans to bring about a civilization of immense wealth.

Once the vision is there, and the potential can be demonstrated, the other three P’s will come along in the wealth creation process. Without a vision of our future success, the smallest of hopes and fears will send our markets booming or busting – because there are no long term metrics we can use as reference; to give perspective to the tiny setbacks and opportunities we encounter everyday in our search for profits.

Professor Klaus Schwab,
The gesture you have made with this forum is laudable although reading through all of the suggestions does not sound terribly enjoyable to me.

My humble suggestion is to begin to look at the impact of globalization and a world economy from the point of view of where we would hope to be ten to twenty years from now and move backwards from there. It manifests itself somewhat as a gap analysis of the difference between where we ought to be and where we are now.

Some of the ways we could look at that would be to see the present and future natural resources which developed and developing nations possess and look at the ways in which all of us together can contribute to creating a more sustainable world economy and environment. For example, Russia is a significant resource for many raw manufacturing materials as well as oil and gas. Additionally, they have a great resource for software technology. China has great capacity for providing manufacturing in their own right.

If we began to create more fluid means for those resources to move between countries, we would be able to inspire more innovation and development in each of those countries as well as in other places around the world. Allowing for freedom of movement of citizens from countries from the EU or the United States who can train citizens in other countries, we provide the opportunity to promote new business and ideas throughout the world. At the same time, by providing free flow of materials and expertise from countries like Japan, India, Argentina and others the United States can begin to move away from the idea of isolation and begin to concentrate on those industries and business which it can excel and export to the world’s benefit.

This can start by looking for areas of trade that would specifically mutually benefit countries and create synergy between them. It takes strong leadership to make it happen but I fear the result of entropy will lead us all down a dismal path.

Posted by Tim | Report as abusive

When will we figure out that the rational-man views of economists got us into this mess and that these same perspectives will not get us out of it. At the root of our financial crisis is a crisis in confidence and until we address this reality we will not fix anything. This is a problem of psychology; people will not start spending with the threat of job loss or loss of savings hanging over their head. Time to require industry to support the social net (aka unemployment); that’ll make them think twice before cutting salary expense to bolster their own pockets.

Posted by RBD | Report as abusive

1. Eliminate all central banks, especially the Federal Reserve.
2. Eliminate fiat money by returning to a gold and silver standard.
3. Criminalize fractional reserve banking.
4. Follow strict anti trust regulations and heavily regulate corporations.
5. Return to a highly progressive tax system that puts more emphasis on taxing wealth and less on taxing work.

Posted by Mike | Report as abusive

Here is a naive idea in need of a creative/practical method of implementation. Note that the creative/practical method will need to be devised by someone else….

Assume that through different financial instruments:
Peter owes Paul $1000.00 principal in cash.
Paul owes John $900.00 principal in cash.
John owes Peter $800.00 principal in cash.

This case shows that there is at least $800 of debt on paper for each of them, which they owe to one of the other two creditors. In fact however, this $800 of debt is a common debt to all of them as both debtors and creditors. Or put another way, in effect each of them indirectly owes himself $800. Of course there are different repayment terms, interest rates, collateral, etc. The point – Is it possible to devise a system that enables all three debtors/creditors to write-off both the debtor’s obligation to repay and the creditor’s claims on one of the other debtor’s at the same time, thus eliminating a mutually burdensome but unnecessary debt from all of them at once?

How much of the current debt crisis is locked up in this kind of circular debt? If there is a large component of ‘circular debt’ playing a role in our current debt crisis and a way can be found to thus mutually write-off a significant amount of it, then both individual market participants and the market as a whole would benefit from the elimination of this unnecessary debt burden….
Note that the inability/unwillingness to repay by any one of these participants undermines the financial strength of all three of them, and thus weakens the financial system as a whole! If it is possible to reduce this mutual exposure, why not do so?

Posted by Hugh Powell | Report as abusive

The main cause of the depth of the current crisis was the unsupervised and unrestricted gambling ( aggravated by leveraging ) of our financial institutions. Through greed and avarice an american problem was spread to the whole globe. Modern economies cannot operate without a sound banking system,but:
1) Banks and investment houses must be separated once again.
2) Banks must not be allowed Unsupervised gambling with depositor or investor money.
3} Investment houses should also not be allowed unsupervised gambling except with
their own money when it is fully segregated from investor money
4) All financial institutions should be strictly limited on the use of leverage.

Posted by leo Wyler | Report as abusive

To answer the question:

“How can we involve everybody in the solution making process,” here are some suggestions:

1. Make your data available to everyone in one central location (online).
- People can’t provide worthwhile suggestions without accurate and timely data. The data will naturally be spread all over the internet.

2. Look to open source software development as a model.
- The Open source software development model could be helpful here. You will get some good suggestions from the masses, but you will also get heaps upon heaps of garbage. The filtration mechanism here is community based. The community should be empowered to filter out garbage by presenting criteria that solution suggestions must meet in order to be considered valid solutions. If they don’t meet the criteria, moderators of the community should be able to filter them out. The criteria can either be drawn up and voted on by the community or presented by top level administrators/moderators.

3. Refuse Anonymity/ Recognize Accomplishment

One of the great things about the internet, is the anonymity it allows people. The problem is, people feel free to say anything anonymously. Anyone who proposes an idea must be held accountable for it. On the flip side, good ideas and those who think them up should be given high praise.

I think this could be a good start. As you can see by some of the many comments that have already been posted, you’re opening up a big can of worms here. This could be beneficial and helpful to all, or it could completely backfire and be a huge waste of time. It all depends on the structure of the building you create to hold the meeting in and the rules by which attendees must abide.

Orion Kubow
english(at)fretmd(dot)com

The US government is approaching the solution exactly wrong. It is much cheaper to incent good behavior than reward bad behavior. Buying bad mortgages rewards poor stewardship of capital. Instead of buying bad mortgages, we need to get people to refinance loans. Tax incentives and loan guarantees should be given to people who can bring more capital to the table. This incents responsible mortages, which will stem future foreclosures. Buying bad mortgages really does nothing if real estate prices continue to fall.

Let me illustrate, I have a friend who has lost all of his initial principal, and is now 135% LTV. He continues to pay because he wants to stay where he lives. But let me assure you that he is considering walking away. He has capital, but he won’t commit a dime because tax losses on real estate aren’t tax deductible. He isn’t making any investment in his home, down to repairing the electrical wiring which needs to be upgraded. We have to keep people like him in his home. The approach of the US government is going to incent him to let the mortgage go, and see if someone will re-negotiate it.

It is faulty thinking to say that people don’t have more money to put into housing. What they lack is a reason to do it.

Posted by Brenton Smith | Report as abusive

Reduce the amount of people or businesses own on a temporary basis anywhere between 30 to 80% for 3-5 years while government pays/complements anywhere between 50 to 5% to the loan holders. Add the negetive interest balances into a government backed security where the original lown owner must pay back at a later date. a win-win situation for all without much discimination

Posted by Majid | Report as abusive

This is a global problem that started with banks and his getting worst as time moves on.

I like the “bad bank” idea in the US, but only doing it in the US will not help the world economy, thus not helping the US. We need a centralized organization similar to the World Bank that would be managed by the G20 members.
It would be a “world bad bank” and losses would be assume by the countries that would use it (G20 countries).

By taking all or part of the bad assets from the G20 banks we would unlock financing to jump start globalization once again. Having countries planning it’s own economy in its corner , would be like having an hockey team playing a game without communicating.

Not doing this soon will make the recession last longer.

Posted by Yannick | Report as abusive

Mr. Schwab:
Start a multi-lingual website where anybody can post comments and opinions, as well as showing how you decided to implement some of the suggestions you got online.
Also, I believe you should let the banking institutions fail and go after fraudsters in the full extent of national and international law or create much harsher punishment on those who so recklessly endanger whole countries and, by consequence, the lives of millions of people (riots, wars, hunger). There are so many banks out there that it isn’t a great loss whatsoever that Citigroup or Bank of America fall from grave criminal mismanagement. For each of those conglomerates, there are dozens of less corrupt banks who will gladly take over. It is a lie that the world will come to an end if those banks are not assisted. Absolute lie. What was going on before they came to existence? There is a past without them and surely there will be a future without them too. What will happen is that a bunch of leeches will be out of a job. It should be noted that should be created a public service website showing the faces of irreputable managers so that any institution worth a dam* won’t hire them. There is no point in giving them management jobs if all they know what to do is destroy the company they work for and make whole governments lose face and real-wealth-creating employees lose their jobs.

Posted by Dan | Report as abusive

I suggest that Prof. Schwab looks at himself and the attendants of the WEF over the past two decades for answers. I am covinced that many of the WEF attendants are behind and the root cause of todays economic and financial crisis. Do you want me to list some names?

Posted by Semirene | Report as abusive

To put it bluntly: entirely rethink your model of economy.
Currently our model of economy demands everlasting growth of industry, which is based on (ab)using the world’s resources.

Two things are obviously wrong with the whole concept:

1. at some point people don’t need more “stuff”, everybody has got pretty much all they need, so everylasting industrial growth is a utopia.

2. at some point the resources on which the industries are supposed to run, run out.

However, put together, there are more then enough natural resources in the world to feed, dress and cure every human being on the planet.

Like it or not, capitalism based on consumption does not work.
Neither does communism admittedly.

Perhaps something in between might work:

“A world governing body guarantees the equal supply of basic needs to every world citizen: food, housing, schooling, medication.
All resources are divided equally under supervision.

Then, for those with the will, fantasy and lust to accumulate more material things (“stuff”), then others, a competitive system is devised.
Want more “stuff”?? (bigger car, latest model play-station…etc..)? Be competitive and go own it.

Personally, i’d rather enjoy a job that was designed to improve the lives of other people as well as my own and have time to play tennis with my son, then to continue working in the current “rat-race” economic model and see if i can get a bigger car then my neighbour. l’ll just ask my neighbour to drive me to work sometimes…

Posted by alfred moesker | Report as abusive

the u.s. needs to stop borrowing billions upon billions from the federal reserve… they just slip further into debt from the interest accumulating on these loans

crises like the current one can be manufuctured at will by only a few key players. get rid of those fat cats and implement a system that doesn’t rely on debt and enslave people to the bank. when people are free to pursue their own interests and education is readily available to all, sustainable solutions for the planet will be able to emerge and be implemented

“money is the root of all evil” never seemed so appropriate

Posted by Harris | Report as abusive

A huge problem getting huger every year is health care. However, most big summits talk about how to have the government provide more care and have more control over how health care is delivered.

The only “big” problem for government to solve is to make health care more affordable. Period. Within that context, it can become affordable for the government (all of us) to pay for some or all of the cost of healthcare for the poorest in our country.

Making catastrophic health insurance mandatory for all (ignoring the important detail in the U.S. of whether done by each state or federally), a la mandatory car insurance to be able to get a driver’s license, is one key. Government can then subsidize the cost of this catastrophic insurance for the poor.

Beyond this, we must get consumers making price/quality decisions back into the market.

Medicare and Medicaid can *only* be provided in this high deductible model, period, if we want a system which isn’t destined to fail. If we don’t fix this, we’ve got the Freddie/Fannie subprime issue all over again – government being the primary reason why “the market” fails.

Society (elected government representatives) can determine what the deductible is per income level. But complaints about “the donut hole” in Medicare today miss the point completely. Every single consumer of health MUST need to care about the cost of (non-catastrophic) care.

Of course we should level the playing field re: tax deductibility for employer vs. employee purchased health care. Long term, we should eliminate the benefit for this coming from employers, but that will obviously require a transition period.

Catastrophic health coverage can be seen as a “right”/requirement to live in an affluent society, and is doable in the same way that mandatory car insurance if you want the right to a driver’s license. Freedom from having to pay $1,000 – $2,000 a year (at the low end of the scale) out of pocket, or even $8,000 – $12,000 a year at the high end, however, CANNOT AND MUST NOT be a right, or we will not be able to have affordable health care, period.

One of the best single steps toward the critical end of allowing the market to work would be to *eliminate* the tax deductibility of any health insurance plan which did *not* have a high deductible, and/or where the consumer can get any given product/service at a price greater than ~50%-60% below it’s cost or price to consumers without such insurance.

The bottom line: The market, including specifically pricing where the consumer of the care makes price/quality decisions that affect their own pocketbook, must be allowed to work. Catastrophe insurance solves the compassion-of-an-affluent-society problem. All other points *must* be secondary to allowing market signals and market prices to work.

Posted by Andy Gottlieb | Report as abusive

real estate – if bank owned properties should be rented using a property management company and collect rent on bank owned properties until market is ready for sale of that asset. Homes in default should be allowed to be transferred via assumable loan clause to eliminate defaults. default loans should be modified to a standard rate of 4.75% fixed for 30 years and 10 year interest only and write down the balance 10% for all loans regardless of performing or not. The banks need to collect what ever payment they can receive and also make it uniform for all not for sum. They want to receive tax payer monies then you write down the balance and fix the rate. Their are never discussions with the tax payer about profits. the fed funds rate at 0.5% means their is still a profit of 4+% on each file. which is better then collecting zero and further loss. current homes in bank inventory should be rehabed by contractors for repairs to increase labor. The reality is the assets are not worth what people paid for them and that is what the gov money is offsetting. Eliminate unnecessary govt spending and return the troops from overseas operations that waste money. Increase spending on education and social service programs for the country. Focus on rebuilding communities that have been neglected for years. Wall street is full of the biggest crooks is this country and need to be regulated to the full extent of accounting practices and audited for all financials. The numbers and figures reported are never true and the banks who accepted govt money need to replace the entire structure by eliminating the to management and firing the board members and corporate officers and appoint govt officers from fdic to run the operations. We keep the same people or hire from within the same structures and it will continue to fail. The other problem is a majority of these officers runing companies have never created anything therefore they dont know how to be innovative with there own monies. Its easy to play with others money without every struggling and creating something from the ground up. The major problem is everything is over deregulated bring back the regulations and checks and balances. I know as an american we will get through this but we need to bring to justice the people who stole from others and attempted to hide their actions. If they did fraudulent or inappropriate activities they need to be punished.

Posted by mike | Report as abusive

My suggestion is to LEND, LEND ,LEND. Only by lending( and subsequently recieving a return) can we begin to turn things around.

Posted by Michael Gutierrez M.D. | Report as abusive

Banks and governments should open their door to all borrowers no matter how small and give them a chance to pull themselves up by entrepreneurship, and avoid bailouts if possible. This idea of other peoples money and free money is what is ruining our economy.

Posted by Michael Gutierrez M.D. | Report as abusive

The solution is rather simple, just as simple as the problem. However, no answer is available for free. Hint: The trail. I’ll tell the solution when payment for the information is received.

Posted by Miguel | Report as abusive

Good bank, bad bank. Shove all the toxic assets into the bad bank and keep the good, sensible assets in the good bank. Next, examine the management at these banks for criminal negligence related to irresponsible and reckless lending practices that led to this crisis. If found guilty of negligence, such parties should be made to pay their ill-gotten bonuses back to the tax payer and serve some time in lockup. Good old-fashioned “if you do the crime, you do the time”. This will set a good example to ordinary citizens and our children, as well as act as a deterrant for future generations thinking of entering into such speculative ventures while putting the tax payers’ hard-earned, honest money and the whole economic system at risk. Bank managers should NOT be rewarded for this blatantly bad and reckless behaviour.

With the first round of the “bailouts” complete, the govts around the world have wasted enough taxpayers’ money by throwing good money after bad already. These measures need to be taken swiftly and decisively. Now is a time to lead by example. The world is watching and waiting for you to act.

Posted by P_Morgan | Report as abusive

- Government should encourage banks and people to start saving money instead of living beyond their means.
- Unfortunately the developed countries are the worst example of saving. They still want to borrow more money to keep their economies going. They are digging a deeper hole if they don’t spend that money in Infrastructure, Health and Green technologies and convince China and India to do the same.
- Credit should not be so easy to obtain. Doesn’t make sense to buy a house with no money down. Not every body can afford a house. The US Government promoted this and even bragged about it for a while thinking that risks were being kept manageable. People need more education regarding using credit.
- As a society we expect quicker returns faster than ever before. It took 40 to 50 years (from the 50′s to the 90′s) for the DJI to go from 1000 – 2000 points. And 3 years to go from 10,000 to 14,000 between 2005 and 2008. Even banks which used to be conservative in their decisions took bigger risks in the last few years seeking better returns. We are bailing out these banks and not scrutinizing them enough. Where have the 350 billion give to banks gone?

- Some of the CEO’s and elite should follow the example of millionaires like Warren Buffet and Bill Gates , who are using their clout and financial resources investing in worthwhile long term investments like education and health and contributing to society in the process.

Posted by Gerardo Gutierrez | Report as abusive

1. rethink the consumption = prosperity model
2. redistribute – no multi million or even billion exec comp packages when laying off thousands
3. dramatize good news, why does the media have to focus on a drop off in new home sales and unemployment when there was an increase in total home sales? Why do we have a dot bomb bubble driven by unfounded optimism in the 90s and now our recession is partially over-reaction?
4. make love not war, it is cheaper to pay for education and health care and it employs people more than killing, bombing and rebuilding, by the way when people hate us less, they terrorize less
5. engage as many people as possible with as many ideas as possible
6. streamline healthcare in the US, 1 of 5 people work in the industry, there are so many inefficiencies, we spend more on marketing for drugs to consumers than on marketing Coke, hospitals only collect 40% of what they bill, we have the worst health outcomes of any developed nation
7. identify points of light and pockets of growth, who is still making money and why?
8. employ people helping people, think micro loans, think barter
9. share information, collaborate, cooperate – don’t reinvent the wheel,
10. educate, sustain
11. don’t freak out – actually the US has seen much worse unemployment in the past and much worse inflation.
12. stop greed, pay it forward, foster good karma, care share and love, think of the whole more than selfish greed – live simply so others can simply live – help each other. I love to ski, but one day’s ski pass at Davos could buy 4 mosquite nets which could save 4 families from malaria. Prosper by helping, maybe Davos could donate a mosquite net in Burma or Africa for each lift ticket. Be grateful and thank God for people you love, health and what you have. Crush Negativity Now!

There is no solution until the world changes it’s thinking. Greed must be controlled. Banks, better regulated. A better distribution of wealth to avoid the pyramiding of world wealth. I’m sure this guy really knows the answer, and he knows who’s responsible and what the agenda is.

Posted by James | Report as abusive

The weapon of mass economic destruction- CDSs -will comletely destroy what’s left of the world economy unless it’s neutralised. Effectively the’re betting slips. So, let the principal governments of the world together issue a simple declaration; ‘all these bets are cancelled, the stakes so far paid to be returned, the contracts voided, and no case can be brought to oppose this decision under any jurisdiction.’ At a stroke the huge overhang of CDSs would be swept away,and the banking system might have a chance of recovery.

Next, use rescue money to pay the the interest due on sub-prime mortgages in default, declaring the houses involved to be social housing. leave the ex owner in place as a tenant, paying a protected rent. with the governments committed to paying the interest, the toxic securities would cease to be toxic, and could then be valued. The banks’ balance sheets would begin to look realistic, and credit start to flow again.

Posted by David Wilson | Report as abusive

In my humble view , the problem really is globalization
until all nations accept standardized environmental
labour and financial laws , we will continue to have this disconnect , I think all the western world has been
doing is exporting inflation to the emerging markets,
a redistribution of wealth on a global scale
and a rethinking of what constitutes success needs to be
addressed, think of it, that pan handler or homeless
person is more succesful then any one of the latest high profile econocide victims because at least the homeless person is still alive, anyway a CEO like Fuld or anyone else who needs to make 100 million or more a year
to feel properly compensated is sick ,what happened to the people who worked for the benefit of everyone,
the whole problem is greed and social unrest will
be the ultimate undoing if today’s the leaders do not
take the lead, just look at France and Iceland
it could be just the tip of the Iceberg so to speak,
and it’s not meant to be a joke!

Posted by Robert Hinz | Report as abusive

By definition the credit crisis/freeze means banks are not lending money, so why is the interest rate at around 5%? With a lower supply of credit the cost of credit should be higher given demand, if demand is high and supply is low, the cost should be higher. Lets say to have equal supply and demand the interest rate should be at 10%, now anybody with good enough credit and can afford the 10% interest rate can get credit. This is what is known as decreasing the demand, alternatively you can increase the supply. To do this the fed would have to increase the money supply to the banks to such a point that banks could do whatever they need to do with the money and still have enough to lend out at 5% to people with good enough credit. But this still might not be enough to stop the root cause, which is the fall in home values. For that you would have to both increase the supply of money and increase the demand for money, which would mean lowering the interest rates, now the fed already lowered the interbank interest rate about as much as it could to .25%, what needs to be lowered is mortgage rates to say 3.5%, again for people with good credit (don’t need to create another sub prime problem). Okay, so how can they do this? One way is to stop selling government bonds for a while and even buy some back, this has the effect of raising bond prices and in turn lowering interest rates. Another way is to artificially lower interest rates by injecting even more money into the banking system, now I’m not talking about just giving the money away, but all the fed has to do is say to the banking system that any money the banking system needs, the fed will lend to them at the discount rate, then the banks should feel free to loan it out to just about anybody (again with good credit). But you say, if the fed is injecting all this money into the money supply, won’t that increase inflation? Well that is to be expected, after all we cannot possibly be sending around 500 billion dollars a year out of the country in the form of the trade deficit, and not expect higher inflation, in fact, this is the real root cause. This is why foreign countries like China buy our government bonds, they want to keep our inflation rate low, so that the exchange rate will stay high for them, that way we will be able to keep buying their products. In a real free market world economy the inflation rate should be allowed to float, that way over supply from other countries will eventually balance out. China is not only holding their currency artificially low, but at the same time by buying our government bonds, they are holding our currency value artificially high. This has the effect of creating a very large national trade debt that (I don’t have any numbers) could be comparable to the nation debt itself of around 11 trillion dollars. There is no way this could possibly continue indefinitely, especially given the effects of compound interest, though it might continue for quite a while longer. Something will eventually spook this bond market (like the threat of hyper inflation), and the whole system will come crashing down (then there really will be hyper inflation as the system tries to rebalance itself). Government bonds at that point will become totally worthless, iBonds might be a little safer. At this point the dollars value will be much lower than it would have if the inflation rate was allowed to float. The real weapon of mass financial destruction is the amount of our nation debt that other countries own. Biggest example being China. Of course, they could never unleash this weapon, because it would have the effect of not only destroying our financial system but at the same time also destroying their own financial system (since we would no longer be able to buy any of their products). So in effect, the US government bonds that China holds are already worthless (since they can never sell them without causing this mass financial destruction). The trick here would be for China to hold massive amounts of iBonds, now if China were to sell off the regular bonds it holds, inflation would skyrocket, in turn causing those iBonds to explode in value, then if China decided to try to redeem those iBonds, the government might have to default, since even more money would have to be created to pay those iBonds, further increasing inflation and further increasing the value of the remaining iBonds, in a viscous never-ending cycle. Now this could be a real national security problem, since China would be very upset if we had to default on our national debt, which could cause real mass destruction, not just financial mass destruction.

In conclusion, the two main problems are, the fed is trying to manipulate interest rates instead of letting interest rates float and controlling the money supply. And the government is holding the dollars value artificially high by maintaining a high national debt, which in turn causes a high trade debt.

One solution, like I say, would be for the fed to allow the banking system to borrow as much money as they want at the discount rate, and let them use it for whatever they need it for, including using the money to buy government bonds, such as 30 year treasury bonds (I think those are around 3%), so they would be able to borrow the money for 2% and buy bonds for 3%, making 1% on the difference, this would have the effect of injecting huge amounts of money into the bond market, and therefore lowering real interest rates, by at least 1%.

Posted by Roger Perkins | Report as abusive

Davos is supposed to be finding a solution to an economic problem in a capitalist system.

As there are a lot of solutions already on this page, I thought I could put down some “not solutions”.

Ten things which are NOT a solution:
1) Policies designed to reverse climate change.
2) Positive karma production.
3) Mass redistribution of CEO paychecks, or other socialist experiments.
4) Trying to formulate peace and goodwill among nations.
5) Donating more money to the third world.
6) Trying to replace the economic market with a fantasy hippy economy.
7) Renewable energy.
8) Blaming the republicans.
9) Buzz words such as “listen to the people”.
10) Anything based on the assumption that the crisis represents a failure of the capitalist system.
11) Reducing the exploitation of natural resources.
12) Anything which opposes or ignores basic economic or financial theory.

Though they are important issues, they are not directly relevant to the economic problem.

People are just trying to push their own issues on the agenda, for fear that these issues will be ignored. In order to end the crisis, they may well be ignored.

Posted by John Smith | Report as abusive

Do the leaders really want to fix the system or do they want to game it so that they and the fat cats end up on top as usual?

If you want to fix it, start initiating more local business and manufacturing and give the less wealthy people money with which to buy the goods.

Otherwise continue to throw money at fat cats and talk about globalization. Hope the corporate masters continue to donate to your political campaigns with their hidden bribes.

Well, 12 things actually.

Just as well I am not an accountant…

Posted by John Smith | Report as abusive

As far as a way to use the global community to help solve the problem, why not create a wikiforum.com where good ideas could be expanded upon, and bad ideas will get lost in the shuffle.

Posted by Roger Perkins | Report as abusive

Collaboration of the masses to solve the problems of the masses. This blog isn’t working for me as there are way too many comments to go through (sorry). And I will project my feelings onto the rest of us when I say that it probably isn’t working for the others as well, as the last comments don’t seem to be on how we can work together to solve this problem; instead, the comments are specific solutions for perceived problems.

Collaboration succeeds when there is the ability to converge on facts (like a good Wikipedia entry), when there is some organization asking a specific question and that organization has the ability to determine the validity of the answers (the mining example from Wikinomics), and occasionally the crowd vote can determine a good solution.

I believe that for this complex situation, that collaborative answers on specific questions should be elicited. Perhaps there can be a collective vote on culled suggestions. This probably means that the whole problem needs to be broken down into smaller pieces, and a guided collaborative effort be undertaken for the smaller pieces. For instance, one piece might be what to do with the banks that took the risks associated with mortgage backed securities. A web site could be set up that contains all the known data about these banks and the mortgage backed securities (a Wiki). Then parties could submit solutions (email to searchable database) and the interested party (the US Treasury Department) could review the solution suggestions, perhaps with the help of the web audience. As a motivation for the web members, some sort of point system could be set up to recognize those with the best suggestions or clearest explanations for or against the proposed suggestions.

One key piece of this process is to produce accurate data for people to review. The banks’ actions are still not clear (motivations, understanding of risk), the inability to untangle the securities (what else are computers good for), etc. are all questions that seem to be repeated in the press. As they say, garbage in garbage out. This information, in the case of the mortgages, will remain hidden while banks fear being penalized for revealing it. Maybe we need an anonymous reporting mechanism for those parties (a good internet ability).
Another key piece is to be able to objectively evaluate the solutions. This is problematic because everyone brings bias (sorry) and these problems are very complex. I would again recommend making the problem as simple as possible by breaking it into smaller pieces or by isolating a particular aspect of a problem. For instance, smaller banks in the US that typically held their mortgages were not as exposed to the initial problems. Their problems are less complex than the “too big to fail banks” (I think, or is that just my bias?). Or one could look at Wells Fargo as a large bank that did well through the initial period to perhaps isolate some of the practices that led to the downfall of the other large banks. Again, accurate and detailed information needs to be obtained.

So, in conclusion, the web can be a useful tool, if the problems and all the data about the problems can be posted in a way that is verified and accurate. Then, good mass collaboration can occur.

Posted by Mark Johnston | Report as abusive

Davos 2009 Conference Shows The World At An Economic Crossroads……
http://wcgfairfield.blogspot.com/2009/01  /davos-2009-conference-shows-world-at.h tml

Posted by Anonymous | Report as abusive

Use a portion of public money to buy ‘troubled’ assets. Nationalize a portion of the banks and/or create new federal banks. Aim for a bank entity count that is proportional to GDP. Prohibit mergers/acquisitions of these ‘core’ banks. Separate the assets that these core banks may use. Place an artificial limit on the size of the core banks. Limit which banks may/may-not deal with external entities outside the relevant GDP zone.

Temporarily lower any tax placed on common transactions. i.e. lower GST, VAT, duties, Sales tax, whatever your GDP zone calls it. Put money directly into the hands of people who are currently still able and most likely to spend.

Have a really close look at how the CDS market is constructed, regulated, and monitored. (It’s the next bomb to go off)

Have a close look at your insurance industry participants and how their current practices are affecting business. Consider more state run insurers.

Posted by Richard | Report as abusive

I believe the problem is in us, in people themselves, i.e. that human nature is prone to greed and excess in all areas. The only solution to rampant greed and excessive spending is for ALL nations to turn in a true heart repentance to God. This is the way to bring help to a dying world.

However, because there is the continuance of a refusal to acknowledge that we can’t take it (riches) with us, we continue to want more and more to be “satisfied and to have the American dream.” Mankind seeks more and more to be self-fulfilled, while God, in the Person of Jesus Christ His Son, has proclaimed that all who will come to Him in repentance can be filled full of His Spirit, by simply accepting His free (no money required) redemption from the bondage of corruption.

Whether we possess anything on this earth or not, we can be wealthy through eternity in all spiritual blessings in heavenly places in Christ, simply by turning to Him and accepting His finished work in dying on the Cross for the sins of the world. HE is the answer!

Also, the Lord promises that if we seek FIRST the Kingdom of God, all earthly things (that we NEED, not all we may WANT) will be added unto us.

The US (and Europe at one time) sought the Lord in prayer and repentance for their sins. Now we quickly take away the rights of a helpless unborn child and we destroy the sanctity of the home, so that we can sacrifice our lives to the gods of sex, illegal drugs, convenience, money, and popularity–and we wonder why these problems come to us and cannot be solved? Cry out to God, He is waiting for all of us to exercise faith in Him alone.

I DARE YOU TO PRINT THIS. HOWEVER, IF IT REACHES THE EYES OF ONLY THE PERSON WHO READS IT, IT WILL BE WORTH THE TIME SPENT. May God bless you by giving you the true gift of His Son.

Posted by Dorie Jordan | Report as abusive

Quick fixes are needed for the worst of the symptoms of the downturn – in particular rescuing banks sufficiently to re-engage their leveraging capability. But a longer term solution to regain confidence internationally and by households and industry needs to tackle the causes of the problems.

Greed, short-sightedness, and poor information reflect the human condition. Three factors enabled the blow-out:
1. Loose monetary policy based on a narrow focus on CPI, rather than also looking at debt ratios and asset price inflation.
2. Loose regulation which assumed professionalism, far sightedness and trustworthiness of financial players, such that their self-interest would ensure the market was self-regulating. The complexity of assets, the size of rewards and perceived guarantees (e.g. in relation to Freddie Mac) ensured that greed et al undermined those assumptions.
3. The role of the U.S. in providing both the world’s reserve currency and reserve source of demand provided a very long rope for the first two factors to work.

Some of the quick fixes are in danger of reinforcing factors (1) and (3). Trying to reflate to former levels of demand and asset price levels invites a re-run of the 2008 debacle.

Assume – optimistically – that domestic and international working parties can resolve (2) without strangling the banking sector with red tape and politically driven decisions. The difficult work is in tackling (1) and (3).

On (1): With household wealth having taken a big hit, portfolio rebuilding will require more saving and thus less consumption than hitherto in many countries, notably the U.S. Central banks (or Treasurys) need to compensate for the reduction in the supply of (broadly defined) money resulting directly from banks’ deleveraging – replacing bad money with good. Central banks should not attempt, through the “printing press”, to compensate for reduction in the velocity of circulation (V) of money resulting from changes in household or industry behaviour. This risks hyper inflation both through growing debt to fund this and through upticks in V. (This can be simply illustrated by modelling shifts in the Hicksian IS-LM curves – sometimes the old tools are the best!) For the future, central banks – possibly with other financial regulators – need to develop monetary policy to encompass changes in real asset prices and debt ratios.

On (3): After the greatest waste of funds in history by the U.S., global fund movements should not effectively prioritise the U.S. by preferential lending to it. This also exacerbates, rather than reduces, global exposure to the U.S. economy. Such lending and such exposure can be reduced by three means.

First, the world needs to reduce its reliance on the U.S. $ before the U.S. reaches unsustainable levels of debt. A common trading currency does not require a uniform issuance of less fungible forms of debt instrument. This is illustrated in the Eurozone where the ECB issues Euro cash but different governments issue their own bonds which are then priced differently by the market. Thus, it should be possible to accommodate a common trading currency across a number of large economies with separate sovereign debt continuing to be issued in separate currencies.

Second, non-U.S. markets should be developed as a priority (the obvious case being China). Third, other countries’ sovereign debt should be supported by pooled insurance arrangements, thus reducing the risk. Potentially, these second and third strategies could be joined together by developing large scale cross-national pooled funds for the development of new markets.

In sum, a radical change in the economic scenery is needed to stymie the drivers of economic destruction.

I like the idea of a “bad bank” to clean out the bad debt which could in turn be profitable at a later more favorable time.

Start small and rebuild within respective states. I believe the United Nations applauded a system called microcredit to generate the system to create jobs in poor countries. Same system could be used especially to generate renewable green jobs and companies.

The only way we are going to survive this economic situation is to see it as an opportunity to change direction.

Good luck to all.

Posted by Eva | Report as abusive

To create a global forum on issues, first break things up into segments..social, economic, health, transport, etc.

Then you’ll need some sort of translation service so that people in one country can read the suggestions of people from other countries. Sort of like U.N. translators.

You’ll need moderators obviously, but this could be combined with translation, make sure that it goes through two translators though to proof read.

Then have the posts vetted by people who are experts..obviously not all suggestions will work.

Then open the refined idea for additional comment and discussion.

Set up a “deal breaker” criteria to discard ideas..EX. if the solution would work, but would involve war..that’s a deal breaker.

Set up an incentive whereby the best idea in any category for that week gets a plaque that says ” I helped save the World”

Posted by Theresa Smith | Report as abusive

Sir, Each country should buy up all home mortages. I mean all. Place them in a Existing unit like in the USA Fannie Mae and Freddie Mac. The good home loans will provide postive income for the business dealing with the bad loans.
Plus with all the bad loans in one place Law Enforcement can have all the paper work in one spot and save money while looking over the bad loans for Illegal Activity.
The Government from then own should be the sole holder and maker of homeloans. This great wealth in realestate will eventually repay all losses and build equity that will support you countries curreny value.
I would suggest the banks and the fiancial markets deal with the Credit Swap losses on their own. The Fiancial Industry created that problem let them solve it. I would however put law in place that would require paper work for swaps. In the USA they have Swaps written on cocktail napkins and scrapes of paper without any real way of telling what or how much it actually is worth.

The Commerical Loans ignor and let the banks and the courts deal with it.

At the end of the day Banks would be left with a truck load of cash and no income stream from home loans. So they will have to loan money for people to buy homes, cars,and other things. Since you the only game in town for housing you can also control the building of new homes and how land is used then too. Possible nipping the loss of farm land to subdivisions in the bud.

Posted by James Wilson | Report as abusive

Government or tax payers shouldn’t bear the huge mess created by irresponsible banks/investors. Let the recession do it’s clean up.

It’d be useless to pump more money into them, which will result in bigger fishes eating up smaller ones. More retrenchments will occur. More job losses will result in more sour mortgages.

Whatever the stimulus package has done for now is enough. Need more to help small-medium enterprises and medium-lower income groups.

And should imply temporary restrictions to companies having retrenchments when they are still profitable.

Government subsidies for companies who doesn’t retrench, and more incentives to companies who hires.

Posted by weiss | Report as abusive

It’s appropriate that the “anti-spam word” that I had to type in order to post this was “TOAST”, because that’s what the world economy is.

There is no “solution”, any more than there was a “solution” for Titanic once it struck the iceberg.

The idea that somehow the consumer debt-driven economy is going to be magically revived is pure fantasy.

Governments had better quickly prepare for feeding and caring for their populations. We are going to devolve into localized, small-scale, village-type economies. The present system’s complexity and interconnectedness is what has doomed it.

Posted by Scorpio69er | Report as abusive

All the banks are crooks and cowards. They are holding the world hostage, demanding governments succumb to macroeconomic pressures that will force governments and ultimately taxpayers to take the trillions of dollars worth of bad assets off their own balance sheets so they themselves can go unscathed. Do not let them win!!! Create a national bank (just one is enough) to lend to those most in need. The cowards will fall inline when they see that they cannot hold the world ransome.

Posted by Fook Yau | Report as abusive

Look closely at how big banks and big corporations have handled small businesses and individual people. There is an egregious pattern emerging. It’s on a massive level. Trust is lost. And those that don’t count are speaking and pulling out: Customer service doesn’t exist anymore, the airlines charge a 15 dollar baggage handling fee that assures they will lose your luggage. Credit card companies will be sure to let you go over your credit limit so that they can charge you 60 dollar over the limit fees and rack up absurd interest against you. In keeping with the overvaluing of property so banks could rake in profit while families are about to go homeless. Don’t get me on moving companies, they loved the demise of the interstate commerce commission. Better to throw your possessions in the garbage than to try to ship interstate. Then we have the major companies claiming to do and finance home improvements. The interest starts accruing before the job is done, if you are lucking enough to get a corporation like sears to finish a job. And the big guys raked in mega bonuses for adhering to a bottom line philosophy of screw you.

Posted by sarah levine simon | Report as abusive

Let the banks rot. Why should the public pay for these greedy incompetant’s mistakes. Too many odious people in positions of powerful wealth. Let’s have some integrity restored to the world.
Observed in a newspaper the other day a list of the twelve topmost bankers/money manipulators that had been involved in and caused all this tragic problem with world economies and ten of them were jewish. Many people believe that this is a jewish heist of the American economy and the financial rewards concommitant. A British bank was given £39 billion, where has it gone? It has vanished!
The elephant in the room syndrome exists here, about time it was exposed.

Posted by Leah | Report as abusive

The only solution to solved this worldwide financial mess were in, is to implement the policies used in the late 1930′s and early 40′s. Let’s start World War 3. It worked for the US.and helped solve our unemployment problem.The US only lost approx. 500,000 lives, only this time my butt won’t be in some muddy dirt hole somwhere in Europe..

Posted by Bill P | Report as abusive

Dear sir,
Although I am an economist with a lot of experience and knowledgeable of the financial system,i think that it will be very difficult to deal with this crisis with a conventional thinking because the world had changed
dramatically since the 80′s in term of media ,financial instruments and globalization.
Each country should deal with this own problems because the reasons of the crisis are different.for example what is happening in the USA in terms of credit thightening was needed and is needed and will be needed for a few years in order to cure the american economy and make it prosperous again on a sound basis.Americans will learn the hard way to spend less and save more.this way the economy recovery will be on a sound basis and not on a temporary”credit air pillow” that will desinflate with the firs blow.
i think this time the people in the street knows what is right for him and he cut spending and debt. it will be difficult to change this positive attitude overnight.
I think the administration should only focus on umproving the rate of employment ,help the undustrial,energy,construction and agricultural buisness directly and stop pouring money in the financial system.
trust the financial system that he will find ways to survive the crisis on his own once he knows that no more money will come from the government.

Posted by yaffa | Report as abusive

If there was more of a motivation to repay debt, rather than walk away when times got hard, we might see less foreclosures in the housing market of the U.S.
Consideration should be given to an overhaul of the personal Bankruptcy statutes so that this option is one of last resort rather than economic convenience.

An extension of this, into the corporate realm could see trailing penalties deducted from Corporate bonus funds that are held in trust for a period of time. Entering into risky deals for short term gain could then be tempered by evaluation of the longer term consequences of the deal. Jumping out of the door before the deal goes bad would then be a less favourable option.

Dealing with global climate change needs to be the economic stimulator for the future. Climate change will stimulate the need for new products and services. However, this effort needs to be done in a systematic fashion, not hit and miss. Only government has the ability to stimulate this kind of systematics.

For example, fossil fuels are finite and at some point, through choice or inevitability, they will disappear. Electricity is the easiest energy source to produce sustainably, however, national electric grids are based on point-source power production, whereas, sustainable electricity production, such as wind and solar, are distributive by nature. This requires a very different power grid. Power grids should be nationalized and supported through user fees, so that coherent, systematic changes that prepare for future production capabilities can be put in place.

Economics is a master status for humans. Wars are always about control of resources. Economic development in chronically war-torn areas, such as Afghanistan, the Horn of Africa, the Congo, the Middle East, can do more to reduce or eliminate conflict than military activity. In these areas, war is the economy, for lack of a better alternative stimulus. Poverty, combined with a fungible commodity, such as diamonds in West Africa or poppies in Afghanistan, allow a war-lord culture to develop which provides employment to young men. Here is the priority sequence of required development: first, all-weather roads and rail, for without transportation, there is no economy; second, electromagnetic infrastructure – electricity production and distribution, communications infrastructure; third, school/clinics (the two functions co-located) and a network of teachers colleges. This will generate economic activity and at lower cost than military expenditures. The way to end war is through a full belly.

A third issue is executive compensation. On the economic Marginal Rate of Return curve, executive compensation reached the extreme right end of the scale, where more input results in a rapidly decreasing level of output. Executive bonuses did not improve management function but damaged it by rewarding greedy behavior and short term thinking, damaging to the entity as a whole. Under the U.S. farm program, disaster benefits are based on the concept of Proven Yield, where a farm’s per unit area production potential is calculated by taking the last five years’ production, dropping the high and low years and averaging the middle three. This process, adapted to executive compensation would reward behavior that favors good long term planning and the financial health of the company over that of the individual.

Posted by fred schumacher | Report as abusive

First of all, there needs to be a market for these complicated and so called “toxic” assets that financial institutions currently hold. The inability to assess the value of these assets is the primary cause of the credit crises. These organizations must be forced to reveal all of these investments and have them valued in some way. Without a private market, governments must create the market by creating a calculation of value and then purchasing them for later resale. In return, the institutions will receive either government guarantees or capital investment (with accountability.)

Next up is the unsustainable economic model of an artificially valued Chinese currency and “rest of the developed world” consumption. Globalization may well be here to stay but it cannot continue in this manner. When third world nations join the developed world on the back of cheap labor, they must join the developed world in not manipulating their currencies. The WTO must enforce fair trade practices that prohibit this kind of manipulation. This would “spread the wealth” to other developing nations as a source of labor and a target of investment. This cycle would continue until equilibrium is achieved. A level playing field is a must for the future.

Third is the problem of finite fossil fuels. The US and Europe are net importers of these resources and this model is, again, unsustainable. Therefore it is in America’s and Europe’s best interest to collaborate on investment in research and development of alternative energy and transportation solutions. If this collaboration can agree on fair sharing of the benefits, this kind of joint venture will do more to create a secure and wealthy future for all involved than any other measure under current consideration.

Finally there is the obvious and simple solution of greater regulation. Never again can we let so very few hold the economic well being of the world in their hands. Transparency MUST rule the day. No need for a long essay here. The solution is simple and obvious.

The current problem is an inevitable result of globalization. It could have been slow and manageable, but that would have required long-term planned readjustment, worldwide. The ‘crash’ is due to short-term thinking and this year’s bottom-line priority. The current paradigm is view people as consumers, not producers. Until that changes, any ‘solution’ will be extremely temporary, every ‘boom’ shorter and every ‘bust’ more extreme.

All ‘profit’ is the result of human productivity. The extension of credit, to compensate for decreased productivity, as manufacturing and ‘soft services,’ such as programming, were moved from ‘developed countries’ to places labor is cheaper, regulation is laxer and profit is higher, created ‘the bubble,’ and concentrated the ‘wealth’ of the world.

The only solution is long-term investment in productivity, but that requires a truly long-term view, and reasonable expectation of profit, based on actual productivity growth, worldwide. Currently, it’s based on the ‘looting’ of resources, not creation of something. The very term “consumer” defines it as such. Use it up fast, so you have to buy more, on credit.

It is a philosophical problem. As long as ‘net worth’ is viewed as the primary factor in judgment of a person’s value to society, we will be trapped in the boom and bust cycle. It is at the root of short-sighted investment. Judging every investment by what it will do to the bottom-line, right now, will always cause disaster in the future. Nowhere is that more obvious than in our dependence on fossil fuels. Technologies for reducing it are not only not supported, they’re discouraged.

The price of oil should be much higher and its use much more limited. It shouldn’t be cheap and its use should be primarily synthetic materials and organic chemicals used in their manufacture, not to produce power and for personal transportation. Basically, not just being burned. Until and unless we move beyond the ‘fire age,’ the growth of human civilization will be limited and the ‘industrial revolution’ will not raise the standard of living of all people. If the goal is limited to ‘me making money now,’ not widening prosperity, by investing in the potential of human creativity and resulting productivity, we don’t have a future.

Posted by Sharon | Report as abusive

Debt forgiveness. Start Again.

Posted by Howard Carpenter | Report as abusive

Sir,

Everybody talks about fixing the problem but nobody talks honestly about the causes. Without fixing them it is impossible to resolve this crisis which I predicted and see continuing for a long time. Fact is all the bail outs, stimulus packages, elimination of ineterst (zero rate), all filed to reignite the world economy. And why?The reasons are simple. Let’s be honest. This is a socio-economic problem. Economy is second to social problems, and what are they and how to fix it? Unlike older generations people today are irresponsible regardless of their social status. Case in point is that people got mortgages, jobs, diplomas not because of their perspiration and intelect but tehir color of skin. Banks had to loan money even if people had no education and jobs to repay. Billions were loaned all across America. These people were unable to repay and did not intend to do it. On the other spectrum, CEO’s earn 500 times what their employees make and they took more away from their employees and cut their benefits and merit raises to a point that when the crisis happened, those who are responsible and productive are afraid to loose what they succeeded to save despite all this and so they stopped consuming and spending. The irresponsible loan policy triggered this latter effect and now we have a group which caused the problem, bankers and borrowers, and anotehr group whcih is afraid to spend because it looses jobs and has little to fall back. How can an average hard working person be blamed or expected to act differently if he has little savings, no job security, no guarantee of health care or pension?? These are the causes and all this throwing zillions of dollars at the problem won’t help, because it doesn’t reach the average person and calms him down. Wall Street CEO’s got more bail out money and what did they do? They renovated their offices, took luxary Las Vegas trips, gave themselves billions more in bonuses but nothing reached the average Joe, who needs to spend money to restart the engine. So my proposal is to immediately change laws, such as elimination of any discriminatory laws, such as affirmative actions, so people will be accepted to work based on their true talents and skills, so they will create and produce and not just be another burden on employer and society. Reduce and limit wellfare and other programs which encourage people not to work. Limit executive compensation, now, to not more than 5 times the average employee compensation, including benefits. Stop throwing money at pet projects which are not benefiting us in short term at all. Limit health insurance companies to 10% overhead so they will be more efficient like in Canada, and limit, yes, limit doctors compensations which is outrageous and is the primary reason for driving the cost of medical care up astronomically. Doctors in US can make a decent living like in many other counrties, even if they do not become millioners. After all, those who go to study medicine should do it out of love for medicine and helping the sick and not out of greed. These are real issues which will not go away and the problem will not be resolved, unless these issues either will get addressed on their own due to misery and exhaustion, which follows human catastrophy and major wars, as it happend in the past or if we are barve to be honest and do soemhtign about it now. We have a choice of doing basic fine-tuning or face major upheavals and prolonged pain to a point of exhaustion. Only then people will become mroe repsonsible and the system will readjust on its won. However, why should we suffer? It is not too late to fix it now if we show honesty and leadership. Are there any intelligent people left to comprehand this?

Posted by leon leventhal | Report as abusive

Much of my comments are based on interviews and commentary on Tech Ticker and Davos.

It is clear that the major banks are insolvent (but most smaller banks are quite healthy). The usual procedure would be to place the insolvent banks in receivership under the FDIC. The shareholders would be wiped out but that is the risk taken when investing. It appears that political considerations prevent this.

Other countries have nationalization insolvent banks but that is contrary to the culture in the US. Nationalizing banks is probably not the best answer as it unlikely that the US government could effectively run the banks, and it would be unfair competition against the many smaller well-run banks.

The provision of TARP money to the troubled banks was a major error as it did not address the underlying problems first. Providing more TARP money would be ineffectual and a waste. If the intention was to provide the troubled banks with money so that they could loan it out, then that has clearly failed. The banks have to hoard the money, as the money (apart from the money used to provide obscene bonuses) is needed to meet the losses announced each quarter and to meet capital adequacy ratios. The problems will probably escalate as the loan portfolios are marked to market at ever decreasing values.

A suggestion that marking to market should be suspended should not be countenanced. That would not solve the underlying problems. It would have the unfortunate consequence that bank balance sheets could not be trusted as they would clearly be fictitious. Improved standards are required if these problems are to be prevented in the future. The opposite policy is clearly inappropriate and dangerous as it would crystalize the lack of confidence in the banks.

The proposal to establish a “good” bank and a “bad” bank from each insolvent bank is probably the only solution that would work and have wide-spread acceptance.

This should be done before any more TARP money is injected into the troubled banks. The toxic assets of a troubled bank should be transferred to a newly establish “bad” bank.

George Soros has suggested that the capital of the troubled bank should also be transferred to the bad bank. I think this would be the best approach.

The shareholders in the troubled bank should have their shareholding transferred to shares in the bad bank. This would be equitable as their position would be roughly unchanged. They might be granted a nominal shareholding in the remnants of the troubled bank to reflect the tangible assets of that bank. Intangible assets would be deemed to be zero.

The shell of the troubled bank could then be re-capitalized. I understand that there would be great demand to invest in a bank that has no toxic assets – one that is essentially starting with a clean sheet.

These now “good” banks would be able to start lending money immediately. Higher capital adequacy ratios and stricter lending practices should be imposed on these banks for a period of say 5 years. That should be a necessary condition of the rescue. During that period, improved financial practices could be debated and regulated, and then these good banks could adopt those policies, which might well be less restrictive than the policies imposed on them during the 5 year period or part thereof.

The boards and the top-level managers of the troubled banks should be fired. No doubt some of the directors and top-level managers would have performed well and might not deserve to be fired, not everyone has necessarily failed in their duties, however like the toxic assets, the boards and the top-level managers should be regarded as being toxic and should be removed. The good bank should start with a completely new board and new CEO and second-tier managers. It might be suggested that an experienced board of directors and top-level management is required, however the existing boards and top-level managers have clearly failed.

Salaries and director fees and bonuses should be regulated by the federal government for say the first 5 years until the financial system has recovered. They should be reasonable, possibly tending towards the austere. There will be plenty of talented people who would jump at the opportunity. There would be a large pool at the smaller well-managed banks. After that 5 year period, regulation of renumeration would cease and would be opened to market forces.

Capital adequacy ratios would not be required at the bad bank as that would be under the control and management of the federal government.

Trading in shares of the bad banks would be suspended for 5 years. During the first 3 months of that period, the real value of the toxic assets would be determined. I am not clear how this would best be done, however it might be possible to take samples of the mortgages, determine the current values of the properties and the ability of the borrowers to repay the loans, possibly take into account market trends, estimate a value for the samples and extrapolate that to the entire loan portfolio. The real value of the shares could then be determined. It will probably be negative. Whether it is positive or negative, it would be used as a benchmark to measure improvement in the financial position of the bad bank at the end of the 5 year period. Any improvement in the value of the bad bank from this benchmark would then be shared between the shareholders and the federal government, that is the taxpayers, on a split determined when the bad bank is formed. The federal government could take its share as a “management” fee, or it could issue itself shares in the bad bank and take dividends and capital gains on the shares. The hope here is that the housing market will improve over the next 5 years sufficiently that the bad bank will have positive value at the end of the period. And if it doesn’t, the shareholders will simply be wiped out.

It is essential that people are encouraged to stay in their homes and not give them up, even if they are under water. Foreclosures increase the inventory of houses for sale and thus drive house prices down.

With interest rates having fallen so low, it is likely that interest payments on mortages might be comparable to rental payments. If the house is under water, the owner may as well stay as they would not be any better off renting. And if the housing market recovers, they might end up having equity in the house eventually.

If the value of a house is greater than the mortgage, the owner might wish to sell in the expectation that the value will continue to fall. It is imperative that such sales be limited. If the mortgage is held by the bad bank, the federal government could value the house and agree that it would make up any fall in value over the next 5 years as long as the owner retains ownership for at least one year. To clarify, suppose that the house could realistically be sold now for $300,000 and the mortgage is $270,000. If the owner sells now, they will pocket $30,000. If they believe the housing market will continue to fall, it would be sensible for them to sell now. But that increases inventory and continues to force valuations down. If the federal government agrees on the $300,000 valuation, there is no longer any incentive for the owner to sell. If they have to sell say 2 years time, then the federal government will make up any shortfall to the agreed $300,000. They pay off the mortgage and still have $30,000 in pocket. If they don’t sell, they might well find that the value of the house falls in the short term but rises in the long term, and the hope that that happens would be an incentive to retain ownership of the house.

Posted by Robert Scolaro | Report as abusive

Guys, I understand you moderate this board, but the idea I posted was actually a solution. Most of this stuff is just opinion, and reprints. I would love to know what it was that got it deleted.

Posted by Brenton Smith | Report as abusive

Reprioritize: Football players, baseball players, etc. being paid millions of dollars a year to do something as silly as a bunch of men/women running around chasing a ball. So called “movie stars” being paid millions for “acting”. CEOs of corporations being paid a gazillion dollars a year while farmers that produce their food do real work. I think that we should shut the food supply off to places like New York City and the other major metroploitan areas and show these urbanites and suburbanites that all of their glamour and glitter does not amount to a hill of beans when they can no longer put food in their bellies.

Posted by Sunbeam Dimension | Report as abusive

Dear Sirs,

Debt forgiveness….across the board…..to individuals, institutions, governments, one and all, etc. Complete debt forgiveness….balance all accounts to zero (0), and start again, with reasonable, common sense laws in place.

It\’s the only way. Throwing billions of dollars of the taxpayers money/any currency at the problem only continues to line the pockets of the fat cats, once again, and does not help EVERYONE. It only lines the pockets once again of the greedy ones, as evidenced in the news every day. The few are STILL making millions in bonuses and despicable, unethical, obscene profits. Stop lining the pockets of the few THROUGH DEBT FORGIVENESS.

DEBT FORGIVENESS….total….for EVERYONE…put the counter back to zero(0). Viable AND doable. If you can throw money at the problem, you can put the ticker back to zero (0). Thank you.

Kitadawn

I believe the issue of massive regulatory failure needs to be addressed much more explicitly. I am a former bank regulator (a Director of Research of the New York State Banking Dept.) and I have spent many years in the investment banking world involved in risk management, risk reporting and risk technology. Lately there have been several proposals for revising the regulatory process, including establishing a clearing house for credit-default swaps. consolidating regulators, new reporting requirements, etc. But there seems to be a failure to recognize that the regulatory process can only work if there are good regulatory people looking at the matters every day. If I may let me offer the following comments:

1. The bank regulators have had the authority to examine any aspect of a bank’s activities. They had the authority to figure out what was going on at the banks and to limit it. The regulators did nothing. So all the new regulations on paper will mean nothing if the regulators cannot or will not do their jobs.

2. Mr. Timothy Geithner recently said “First, the multitude of overlapping regulators must be rationalized into a coherent few, the communication between them improved and their turf battles ended”. Unfortunately consolidating the regulators will produce some streamlining but will not likely achieve the desired goals. Sending a regulator who makes $50,000 dollars a year to examine the activities of sophisticated financial traders who make millions of dollars a year is not a fair battle. And if you have ever worked in a government agency, as I did for over 4 1/2 years, you will be intimately familiar with the viciousness of the turf battles among the senior officials. There is a lot of deadwood at the top of the agencies and it needs to be cleaned out. A Herculean task if there ever was one.

Posted by S. Hellinger | Report as abusive

There must be a recognition that the extreme diversification of the financial instruments, CDS, OTC derivatives, etc, have advanced beyound all logical relation to the underlying investments. These losses must be acknowledged, not swept into the future by massive injections of fiat currency that further set the stage for inflation and devaluation of the same. Major financial institutions must be allowed to fold, not kept on life support by governments afraid of riots in the street. Past mistakes must be acknowledged and responsibility accepted by those responsible. There is a consensus among the average person that the banks and financiers responsible for this mess, in colusion with politicans, are doing thier best to cover up and postpone the inevitable. Businesses cannot begin creating or sustaining jobs when staggering losses are being hidden behind mazes of financial shenanigans until they become too much to hide.
Governments, employees and those on government assistance must all share a portion of the blame. Governments for spending beyound thier means on programs that they do not need to be involved in. Employees for demanding ever more money and spending easy credit, following the government lead into debt. Those on Government assistance for not expending the effort to fend for themselves. We have become used to a certain level of existance which we must temper if we wish to see a true light at the end of the tunnel

Posted by Ed Zimmer | Report as abusive

1. Abolish the Federal Reserve.
2. End the fiat currency so that our money represents actual value.

Posted by Alex | Report as abusive

World leaders need to change the mindset of the global growth model. The world is much smaller now. Endless growth is not sustainable and cannot continue to work. Look at sustainability. We have a growing population, dwindling resources and global climate change. An economic model that ignores these facts cannot be resuscitated.

Stop trying to boost consumer confidence. Economic contraction is a good thing right now. Focus the economy on how to retool for sustainability – energy efficiency, sustainable agriculture, etc. Promote regionalism where people consume and produce locally. This will increase small business growth. Rethink the urban/suburban model that requires commuting that eats energy and time.

This global economy is killing us. Sure, we get cheap goods from China, but we’re not including the costs of environmental degradation, both in lax environmental control in developing countries and all that shipping. I’m not talking about protectionism, but it simply doesn’t make sense to import goods when people that are unemployed can produce goods locally – it is not sustainable.

Quit trying to privatize social functions that are best served by government – health care, utilities, prisons.

Any economic system needs controls. Quit fighting regulation.

Posted by DeeDee | Report as abusive

I read about the idea of a “bad bank” currently thought of by the US Treasury in order to free the banks of the toxic assets and enable them to reinstate the credit lending and kick-start the “Main Street” economy.
However, is it possible to do the opposite i.e. create a “good bank” instead? The Treasury could set up a bank in charge of lending to the Main Street economy and allow the credit facilities to flow again. In such a scenario, the US government can allow the market forces to determine which of the financial institutions to survive the ordeal and save the worries of using taxpayers money to rescue the banks that involve further regulations in e.g. executive remunerations etc since it would have full control over the new “good bank”. And when some of the banks do fail, the good bank could take over the depositors liability (i.e. equivalent to guarantee deposits) to protect the common folks deposits in the bank. And the borrowers that such failing banks may force to foreclose their properties may be rescued by the “good bank” i.e. offer a fresh new loan. The taxpayers’ money that are used to to support the good bank can then be directly pumped to revive the Main Street economy. And finally, after some years when things stabilize i.e. the Wall Street had cleared its excesses, the US government could then issue shares or simply sell the assets of the “good bank” (hopefully at a premium to earn a return for the taxpayers) to the financial institutions who survived.
Hope this is a worthwhile suggestion for the US Treasury to ponder over.

Posted by Peter | Report as abusive

Dear Sir,

The current problem is defined as Credit Crisis because Banks are not willing to give credit. The reason is simple enough. The Banks have already given enough credit and cannot issue more credit. They need to get the credit paid back.
The US Government have issued cash infusion for Banks to stay alive. but technically Banks still cannot issue more credit without risking failure.

The world needs to calm down and focus on identifying the debtors and all these debtors to pay back. This is going to be very painful because most of these debtors bough inflated assets that are not worth as much today.

If Banks push for Bankruptcy of these debtors and write off the debts, Then the Banks themselves will go into Bankruptcy.

The guys who sold the inflated Assets are the ones who should be helping here. But they will not. They are the winners. why should they?

Printing more money as US is suggested to have done. is actually the best way to go forward and introduce inflation.

However, the best way to introduce inflation is through salary increases for the common man earning less then US$20,000 a year. Only that will increase consumption, inflate Housing prices again and allow economy to climb back to health.

Providing more money for Construction projects as Obama has proposed will only send more money to Developers and not common man. This Construction Corporations are the companies who sold inflated houses and earned all the money. Why is another Trillion is allocated for them. The construction workers on this projects will earn less then they earned during the good times. It will not boost the economy.

Stop credit. Stop spending.
Start issuing cash to corporations who employ workers. I am saying issue cash not provide further credit.
It should be similar to subsidizing farmers.
Start giving the money.

Ford, GM, and all manufacturers should all be provided subsidies. and Unions should be encouraged to provide better salary.

Blind Globalization which is depressing wages worldwide should be put on hold for a while.

Laws which provide equal pay for man and women should be amended to include clause for equal pay for all world citizens. So that Corporations cannot find cheap worker from Asia to work in America but find ways and means to improve real productivity.

Posted by VelShan | Report as abusive

First if you want retail sector to pick up: Eliminate Sales Tax nationwide. Secondly make it more affordable to get to the places by Eliminating the tax on Gasoline.

Give businesses a tax break. NO TAXES in hard times. But they must plow the money saved into providing incentives for customers to spend money with them.

Reduce tax burden for a flat tax of 10% across the board for everyone worldwide. No need for accountants, taxpreparers. Easy to calculate your tax also. It should be taking out once a year for simplicity sakes. Get rid of payroll social security taxes in favor of the individual in charge of their retirement savings. Social security is a failed institution under the federal government.
Allow individuals to take out of their retirement for whatever reason they need to without penalties.

Governments worldwide must consolidate their functions. Example: The town where I live got together with 9 other towns are now only one town. They closed municipal building, sold them and consolidated services saving the average taxpayer over $3,000USD yearly. Now that is a true stimulus to boost the economy, not a measely $500 or $1,000(Thats a joke).

Banks: Top management need to be rewarded based on profits and losses. If the company losses money, the executives need to receive only $1 and give up their stock options. If the company makes money, yes they deserve a small portion for doing so but only after the employees who work hard receive their profit sharing for putting them thru the ringer.

Posted by Rupen Shah | Report as abusive

The economy is closly tied to the integrity of its peoples. There is no way for it to prosper and grow without an authority that has strength in itself as well as morality and integrity.
The only way to change the economy to a long, sound and long lasting, satifying state is to change its government and authority; but beware which authority you choose.
The choice is always between life and death!
Ask these questions:
1. Who rules the world and
2. Who has the final authority?
These are two different systems alltogether.

Posted by Madeleine Catussatto | Report as abusive

I think that the question is how people can be more involved in the solution creating process. The idea being that three heads are smarter than one and 1m heads are smarter than 100.

I would say that considering 2008 marked the first time in our history that more than 50% of the population of the world is living in urban areas we can assume that internet usage will continue to grow. The information and communication gateways that Prof. Schwab mentions in his question are important but they mean nothing if there is no way to filter the quality content out of them.

For example, the Professor poses a simple and open ended question in this video, but I went through three pages of comments and suggestions, none of them addressing the question. I would suggest creating a small advisory group to the WEF that would focus on developing a backend information gathering system that will focus on “listening” to the internets users. This way you can anticipate new trends in the way people interact with each other.

In addition the new campaigns should take advantage of systems that allow users to find content that they are interested in. Web 2.0 allows users to connect to like minded individuals without looking at all the other information that is unrelated to their interests. This way you can have a more natural exchange of ideas over the virtual platform that simulates the way we gravitate towards people with common interests in the flesh for a lack of a better word.

Posted by Wojciech Tusz | Report as abusive

NOW IS THE TIME TO RE-INVENT OUR MONETARY SYSTEM FROM THE GROUND UP.

Central banks create money OUT OF NOTHING…OUT OF THIN AIR, like a magician pulls a rabbit out of a hat. They loan it INTO EXISTENCE and charge interest on it as though it actually represented some sort of risk assumed by the bank.

Our current system of money creation GUARANTEES perpetual inflation and guarantees collapse. This has been predicted by monetary theorists such as Bernard Lietaer, Thomas Greco and others for ages.

Our current monetary system also guarantees perpetual accumulation of wealth by those who create money. As Anselm Rothschild put it, “Give me the power to issue a nation’s money; then I do not care who makes the law.”

Like a cancer that eventually consumes its own host, this system will eventually kill our planet if allowed to continue.

Borrowing more deficit money from banks to stimulate the economy may provide short term help but will only exacerbate problems in the future. That money will still be owed, plus interest, back to where it came from. Future generations will be reduced to indentured slaves, with their tax dollars gobbled up by futile attempts to pay off that gargantuan interest.

(Hmmm…What’s the annual interest on a trillion dollars?)

For a solution to the problem, create regional business to business mutual credit networks, such as the very succesful WIR Bank in Switzerland, which has been credited with stabilizing the entire Swiss economy.

Through such networks, business do not have to rely solely on interest-bearing bank credit, but can offer interest-free credit TO EACH OTHER in the form of goods and services.

In this way, such networks act as shock absorbers to the global casino economy, creating stability, prosperity and regional self-sufficiency.

For a detailed explanation of how modern money is created, Google “Money as Debt” in Google video. You can watch the whole film there. In my opinion it is one of the most important films ever made.

For a detailed explanation of the WIR Bank, and how to get us out of this mess, PLEASE go to the website of Bernard Lietaer, http://www.lietaer.com/

A wealth of information on monetary reform is also available on the website of Thomas Greco at http://www.reinventingmoney.com.

In 1919, Woodrow Wilson stated,

“I am a most unhappy man. I have unwittingly ruined my country. A great industrial nation is now controlled by its system of credit.We are no longer a government by free opinion, no longer a government by conviction and the vote of the majority, but a government by the opinion and duress of a small group of dominant men.”

He was referring to the creation of the Federal Reserve Act of 1913.

Now is the time for President Obama, and the rest of the world to turn this around, before it’s too late.

Posted by Lori Heath | Report as abusive

A message to CEO’s and Boards of Directors.

How much money do you need? How much house do you need? Stop the rewards for failure. Stop Enroning us. Stop the bonuses. Stop behaving as if you are above the law. Pay your fair share of taxes. Stop the miscellaneous fees you take from share holders to pay upper managements taxes. Your work is not more important than the work of others. You are committing crimes against humanity.

Sincerely
Paula Grieb
School Nurse

repeal bankruptcy laws.

eliminate banks lending to other banks.

Eliminate short selling on wall ST. or put 36hr freeze on short selling.

create or increase incentives for farmers growing grains, vegetables and livestock.

Increase or eliminate income limit for receiving food stamps and WIC. Increase amount of WIC and food stamps given.

Build additional oil refineries within the US.

universal health care.

Posted by Victor | Report as abusive

First, thanks to Prof. Schwab for letting the little folks offer their 2 cents. I think that rather than bailing out failing institutions, business or governmental, we need to think about smaller markets, smaller growth, and locally relevant economics. I’d say that in the short term pulling the plug on quarterly dividends, paying down outstanding debt, and refusing to invest in hybrid securities ought to be in every corporation’s play book. Decentralization of businesses, looking toward local or regional co-operatives rather than global corporations would be a better model in the near term. And focusing on manufacturing and construction in local areas with local resources with human appropriate technologies would be a good way to restart the economy.

Thoughts?

Posted by Marc Kivel | Report as abusive

If the business “leaders” were to look forward past the end of this economic mess-(“we will get through it” warren buffett)- the parties involved expecially the bankers who got us into this mess with bad products-need to bite the bullet and mark to market assets in their portfolios. For those with the stomach to hold onto some then they can perhaps breakeven or proift a few years down the road. For those who cannot or whose mbs cdo or other bad paper is causing their credit quality to erode should shed these. the “global” buyers that buys up these mark to market assets(like junk bonds) using the bidding system that may drive the value up or even down will spread the risk over numerous other businesses that see light at the end. If investors buy stocks at 5 year lows looking forward then why doesn’t a tool and die maker with no exposure make a long term commitment much like an investor does. If a going concern has minimal risk then the right thing to do is to pitch in and help shoulder the burden not view the world as every business for itself as is now the case.

Posted by darrell c | Report as abusive

The global dynamic system has been expending because of relatively inexpensive inputs like energy, productivity gains, labor, easy access to commodities. Going forward we will encounter bottlenecks in energy and probably commodities(all the big and easy deposits have been found and exploited). So we face a choice, stop growing and declining or find alternative solutions. Things got complicated because the system has been leveraged to price in a perfect scenario of abundance. Energy was the first bottleneck and showed us the limits. The result was a shock that combined with a housing bubble and extreme leverage caused the cascading domino of last year. In a paper/debt based monetary system we are all standing on the shoulders of previous generations. Meaning new debt supports the debt and investments of earlier times. It makes absolutely no sense to let this system collapse by bankruptcy and forced liquidation. This would destroy the dreams and living standards of billions of human beings. What we have to do is to save the system by increasing the money supply, monetizing some of the debt and aggressively addressing the bottlenecks. Most importantly the current crisis should be used to increase (alternative)energy capacity to a very rapid pace. Ultimately we will have to live and adjust to a higher price level because conventional hydrocarbon supply is limited and causes global warming. Central banks need to accommodate this quest for new energy. Ultimately the market will solve energy and commodity imbalances but at a higher price. Policy has to be to anticipate these bottlenecks and direct capital in their direction before the worst shortages and price effects occur. We have no other choice than to accept a, at least temporary, higher price level and ultimately let the market play out. Leverage has to be regulated to no more than a factor of 10 and derivatives need to be supervised in a (global) clearing house. Stable inflation rates and economic growth will be impossible because of declining oil reserves, a deflationary collapse would be a catastrophe for humanity and needs to be avoided at all cost. This means that central banks need to ignore higher prices at least temporarily. We need to increase free/low cost inputs into the global, dynamic, economic system by way of new technologies so that it can continue to expend and to lead humanity into a better future.

Posted by stefalb | Report as abusive

Here is
1.The Alternative Stimulus Package Outline.

The goal of the Alternative Stimulus Package is to allocate extra capital of $1 Trillion in the USA
economy in a relatively short period of time. This economic stimulus might stop the
downward momentum the US economy is experiencing now. This package tries to allocate extra capital
efficiently, and potentially without adding to the US long term deficit. It also would strengthen
the US financial system.
Here is the outline.
The US Treasury borrows $1 Trillion at around 2.5% for five to ten years with the goal to invest
profitably this pool of money in the US economy. The conduit for this investment could be
the US banks.
The US Treasury would offer banks the opportunity to profit by investing money from the pool
without risk. The US Treasury would offer banks money at 4%. All the money a bank is able to
place successfully above 4% would constitute its profit. The bank would not earn any money, if
its total return from the money pool does not exceed 4%. The bank will not lose money
in case its total return is lower than 4% or even negative. However, the bank would lose future access to
access to the money pool in case of negative returns.
Therefore, all the profits from the money pool are shared between the US Treasury and banks,
all losses are the US Treasury’s.
The relationship between the US Treasury and a participating bank is similar to the relationship
between an invsetor and an agency. Agency is hired by investor for the purpose of investing.
The banks will be willing to participate in this arrangement, because there is no downside risk
for them.
This plan does not describe many details. What is the distribution mechanism of the money between
different banks, small banks, big banks, banks from different states ?
However, this is only an outline of a plan.

2. Close GSEs,FNMA and Freddie Mac. Honour all the commitments made by GSE’s in the past, but liquidate
them. No implicit government guarantees which manipulated
housing market for tens of years. The GSE’s function should be handled by private companies, banks, mortgage
originators.
3. Securitization should be restructured. Before any type
of security is offered, it should be approved by regulatory body. Any type of security should be transparent to the potential end buyer. For instance,
mortgage backed securities could be conglomerated by
city or town, so that could be rated. The rating agencies should be paid by buyers of the securities, not
by issuers.
4. Bank CEO compensations, Wall Street bonuses is just a
small part of a big problem. The real problem is not just
with banks and Wall Street, but with all publicly owned companies. The compensation is determined by Board of Directors of publicly owned companies. The Board of Directors in reality is controlled by management, not by stockholders. There should be corporate governance reform.
5. Many current structures have builtin systemic errors.
They are similar to engineering systems. However, there
is no engineering group, that analyzed the existing systems from the point of stability. If it were, the current financial mess could have been predicted and avoided.

Posted by Alex Vasilyonok | Report as abusive

The MacGuyver engineered Solution (for today & now: get us started -> interim before more elegant solutions are found)

Re-hire generally qualifed people (ie. engineers, IT, welders, mechanics, administrators, financiers, UAW/CAW) whom have recently been laid-off en masse, to engage in a 2yr Fed/Municipal work assignment targeting \”green + clean\” energy production. Their salary comes from a portion of the Un-employment insurance they normally would receive + Fed infrastructure funding that has already been, and is being committed in Fed Gov budgets. Hire industry specialist contractors, to lead and guide and train this labour pool through the design, procurement, implementation and initial management phases. Employ them initially through Fed Gov funded start-ups targeting naturally abundant energy sources:

1) Solar Photo/Thermal energy
2) GeoThermal energy
3) Wind energy
4) Other (eg. conservation initiatives; Rain energy; Kinetic Energy via rollers in roads; Potential Energy storage via gravity or chemical storage solutions; -> any solution that does not require *incineration)

*Note: keep incineration derived energy for huge cities whom have land-fill problems and need to divert & convert garbage into energy. See Tokyo example.

Design \”green + clean\” energy solutions that take into account mass aggregration/economies of scale for town or city size populations < 250,000. With \”green + clean\” new energy creation by town/city, current transmission line distances (and losses) can be reduced, thereby also reducing the production load on current Energy Plants. (ie. encourage and enable down-turn of dirty energy production from coal-burning plants). Total Cost of Ownership for each \”electron\” produced should be equal to or less than oil/coal/natural gas based energy if you factor in \”subsized\” labour pool + benefit of meaningfully employed people during recession, reduced transmission losses, avoidance of CO2, increased manufacturing demand for \”green + clean\” materials.

In return for sustaining their current Fed Gov Income Tax incentives, and perhaps providing an additional 5-10% Tax incentive for those who go beyond, build a demand market by mandating that all Large Building Owners + Businesses (ie. this segment represents 35-50% of all energy use in a country) must purchase at least 30% or more of their energy from \”green + clean\” energy sources and must invest in technology solutions which help reduce by 20% their energy budget. Legislate that the Utilities who produce and distribute this energy today, must initially buy this \”green + clean\” energy from these Fed Gov funded startups. In 3-5 yrs time, when these ventures are properly established (and hopefully the recession fully over), the Fed Gov may privatize these assets selling them to the highest market bidder or giving them to the Municipalities or selling them to the Utility companies.

Probably very simplistic view, yet we have many technologies and idea\’s in place today … they just have to be \”holistically\” networked with some community passion and attitude.

Courageous Politicians are needed to sell the idea to the population and generate the passion/attitude needed from communities. Then Hire Engineers to run the \”green + clean\” startups. They will get it done.

Now that capitalism has prevailed, it is clear that we need an international bottom line of regulation to prevent a race to the bottom in individual countries and markets. The four freedoms, Freedom of Speech, Freedom of Religion, Freedom from Want and Freedom from Fear should be the essence of this bottom line and they are provided in the Universal Declaration of Human Rights.

Unfortunately, the UDHR is not legally enforceable. It is time to make it so, along with the twin Covenants on Economic and Social Rights and Civil and Political rights by drafting and adopting an International Convention on Human Rights. A draft International Convention can be found on our website http://www.2048.Berkeley.edu.

This website is part of the 2048 Project at the Berkeley law school and our mission is “to draft and international framework for enforceable human rights that can be in place by 2048, the 100th anniversary of the Universal Declaration of Human Rights.

We encourage leaders and participants at Davos to visit our website and make a comment about how this framework, “a new bottom line” based on the rule of law, should be designed.

Thank you for collecting ideas outside of your meeting, and we hope to participate with you.

Dr. Kirk Boyd
Executive Director
2048 Project
University of California, Berkeley
School of Law
kboyd@law.berkeley.edu

The world financial crisis was engineered by bankers and politicians. They should be identified and prosecuted. It is now expected that the people of the world will call for change, and Govt will respond by more bad Governing.

We need a complete overhaul of Govts. We need to strip the billionaires of their assets, and allow them to keep 10%. We need to abolish the UN and all inneffective world institutions and start over.

We also need strict population control. And elimination of OPEC and any other cartels.

We need to fix the price of oil at $30 bbl. For at least 10 years.

The worlds oil reserves belong to the people of the world not the Arabs.

We need a full court press in developing hydrogen extraction from sea water using RF energy and the development of magnetic motors.

All corrupt politicians should be jailed within 60 days. For a minimum of 25 years.

All terrorist acts should be named for what they are …..murder. God needs no army
he just needs a few with brains.

All weapons should be banned.

Posted by J Gutierrez | Report as abusive

Personal liberties and Freedom are the key to a successful and prosperous nation.

Posted by jason | Report as abusive

America do need to clean up Corporate America and go through CEOs and replace them with CEOs with hands on experience, and NOT paper (degree and no hands on experience in the industry) CEOs. Take greed and abuse out. Do NOT sell foreclosed homes, but lease back if possible… stabilize citizens’ life and the market. Restructure loans for all homeowners need to be restructured due to poor economy… at least for a while.

Have profitable Exxon to assist bailout auto industries by restructuring, consolidating and up efficiency in exchange of reasonable incentive, but not to repeat oil company trying to keep cars on road and not mass transit as in Los Angeles in 1960 or 70′s??? Invest in alternative energy, R&D, education – teach dicipline << especially to those accountable executives… teach common sense and get rid of frivolous lawsuits… and much more… Global confidence is key to the success…

Posted by Munki | Report as abusive

BEST COMMENT? You have got be kidding! This guy wants to explore the depths of a true deep and real economic depression. It was letting the market place ‘do its thing’ that got us into this mess in the first place. Now he wants to allow them to run amok even more to do even more harm! It is time to face up to the reality that maintaining a national policy of ‘Greed is Good’ has been a dismal failure! Wake up from the dream!

Posted by Hugh Powell | Report as abusive

MORE ACTION FOR THE LESS FORTUNATES, LESS TALKING, LESS GREED, LESS SELFISHNESS FROM ALL THE POLITICIANS AND MANAGERS ASSEMBLED IN DAVOS, AND THE WORLD WOULD BE A BETTER PLACE!

Posted by BRIGITTA MOSER-HARDER | Report as abusive

Can the World Economic Forum, with input from the major finance departments of the group of 7 leading countries(plus more as possible)develop a monitoring group who can provide a public (and non biased) advisory to governments and national regulatory bodies in order to manage financial risk. This would not interfere with free markets, but may alert us to major risks due to things such as subprime mortgages, collaterized debt obligations, and even inaccurate inflation data and other economic indicators which risks may not be known and yet can destroy our economies? In addition such a group may be able to monitor the ‘integrity’ of global currencies which for example you might expect the US Treasury to have done for the US dollar, but apparently they didn’t do so, and they ignored the risks caused by low interest subprime mortgages and easy money over the last few years. Looking forward, the current increases to the US money supply are being soaked up due to uncertainty in other currencies, but unfortunately when we start coming out of this recession and some money transfers back into the foreign currencies then the USD will fall, the FED’s will increase the interest rates which will kick start inflation that may exceed expectation due to the excess money in the system. Hmmmm, if the various regulators don’t keep track of this inevitable sequence of events, then maybe I can figure a way of making money out of this, but then I’d just be another greedy trader?

Posted by Will Berends | Report as abusive

What I have a hard time believing is that (at least regarding the financial descisions of the United States government) our current plan is to spend even more money. Have all of the funds of th original $700B bailout been used? And now we’re a senate majority away from spending another $819B? What for? For infrastructure? To create jobs? To loosen bank lending? I think this whole crisis is ridiculous. I’m worried about a new administration rushing in to amend a situation 10 days after taking office – when this problem has been developing since December of 2007. And I don’t think the US can afford a $819B mistake. If they want to create jobs and stimulate the economy, don’t spend money….lose it…federally. Have Washington cut every income, capital gains, state, federal etc. tax for a whole fiscal cycle. I mean, Washington is losing money anyways right? And quite frankly, since this stimulus bill is coming out of my pocket for the second time, I’d much prefer they just cut my taxes as opposed to spending more of my hard-earned money. Oh, and please don’t go through with the ‘bad-bank’ idea. I don’t understand how removing debt from a bank and handing it to Washington is going to do anything but divert the issue. Toxic assets need to be liquidated or settled, moving them to a new location is a temporary solution. And then what happens if the banks, now free of their bad debt, incur more losses in the future and credit tightens up again? Are we going to create another bad-bank for that too? You can’t sweep trillions under the rug. The major outcome of all of this that I fear most however, is that once all is said and done, the feds will have a hand (financially) in EVERYTHING. And then, ‘re-distributing the wealth’ as the Obama adminstration puts it, will be much easier for a federally owned and regulated economy and a democratic-controlled house and senate. Say goodbye to Capitalism; hello Socialism. You think I’m wrong? He’s been in office 10 days and he’s already going after the excessive bonuses on Wall Street and strengthening the ‘working class’ to have more leverage on employers. And also, all those billions of our tax money that went into GM and Chrysler, AIG and Citigroup? I want dividends, and shares of stock. Since when does the American taxpayer aid a ‘too-big-to-fail’ corporation?

Posted by Ross | Report as abusive

Based on the results from the first round of TARP bailouts, continued bailouts probably will not help. Since taxpayers are funding the bailouts and 2/3′s of the U.S. economy is consumer-driven, perhaps taxpayers are the ones who should be bailed out, not the “smartest guys in the room” who created the problems in the first place.

Some general thoughts:

Governments should not allow corporations to become too big to fail. Such efforts will decrease the fallout when a firm fails, promote competition, and protect jobs. For instance, Pfizer should not be allowed to acquire Wyeth period. And particularly with $50 billion in loans from banks bailed out by TARP funds. If the acquisition is allowed to continue, the taxpayers are essentially paying for an acquisition that will cause at least 20,000 more layoffs (and all that entails) and will lessen competition in an industry that is already compromised. Further, the pharmaceutical industry should be a matter of national security, not some financial game played by masters of the universe who seek large bonuses and ego gratification with no regard for society.

Banking firms that have required bailouts should take back all bonuses paid in 2008 and create a fund to help taxpayers who are being foreclosed. That, or give grants to communities most affected by the recession to create jobs and provide emergency assistance to those in need.

The U.S. government should consider means-testing Social Security benefits. For instance, the top 5% do not need social security benefits, nor do the top 25%. Further, there should not be a phase-out for Social Security and Medicare taxes – meaning SS and MC should be taxed on 100% of earned income. Social Security and Medicare funds should no longer be poached and used for other sources.

The U.S. needs universal health care. It could be paid for in any number of ways. There should be no debate about this. Health care should be a right, not a privilege and it should not be tied to employment. The former health insurance execs and their lackeys could be put to work processing universal health care claims. Let them devise methods to improve claims processing efficiency, rather than devise draconian methods to deny applications and reject claims that result in poverty and early death for an increasing number of U.S. citizens.

Globalism has not worked. Each country needs to become self-sufficient, creating their own food, goods and services, selling and trading their excess, and helping each other during hard times. Further, within geographically large countries, regions should generally be self-sufficient. Globalism as we’ve seen it practiced has been used for exploitative and crass purposes, not for any noble purpose. The ideas expressed here are not “protectionist” or “nationalistic.” They are common sense.

The U.S. needs to end the wars in Iraq and Afghanistan. The war on terror has been an unbelievable power grab – a grab for oil, a grab for American’s civil liberties, a grab for taxpayers money.

We need to develop alternative fuels that are clean and renewable. This should be the top priority after stabilizing the economy, ending the wars, and providing universal health care.

My two cents.

Posted by Jane | Report as abusive

Since almost ever in humans lives moneys are a centerpiece of everyone’s lives. Thats why it was for a very long time considered as sacred; and to do fake money was an horrible crime as it could ruin the confidence of the people into the world they live in. To give the power of issuing money to the private hands of bankers, who run their own agenda of self enrichment, and use the money swindled through the interest rates for their own goals, was or the most stupid thing a government may have done, or a treason. To bailout banks is just the continuation of the former treason; it is just more visible and so, more scandalous.

Posted by Jean De Guise | Report as abusive

HIGHER STANDARDS!!!
Is the only way out of this crisis.
It is about time we change our habit of consuming substandard products and services. The quality of such products and services can not be in the mercy of the markets anymore, it has to be regulated by law. One can argue that it is already regulated, but the bar has to be set much higher. Better and safer products, longer lifetime products, higher ethical standards on corporations and financial institutions, will translate in more jobs, stable markets, better education, healthier population and will go a long way in preserving the environment and global natural resources.
Utopic?! No at all. Wherever this standards are set higher the crisis impact is not as bad as in other parts of the world and their way out will be even easier. Lets follow the best.

Posted by Misha | Report as abusive

Explore ways of creating a system that works for humans, rather than finding more clever ways of enslaving humans to the system.

Posted by Josef | Report as abusive

Well said Josef. I like your sintetic thinking.

Posted by Misha | Report as abusive

The world has become polarized: global, yet local.
Many local people complain about the excess of greed and lack of accountability of the global set. But the big guys only mirror us. Madoff would not exist without thousands or even millions of greedy smaller investors willing to surrender their savings and reason to the comfortable illusion of miraculous returns.
Any change, global and local, will have to start with the people’s mentality: we need to be better educated and accountable, lower our consumeristic expectations. The rule should be “do less with less” (resources). Each of us needs to get involved in government, starting at the communal level.
Globally, we need some government. Most large companies are global, yet governments are isolated and struggle to recruit and finance competences. Smaller counties, states, nations are fighting battles for which they cannot be equipped. Incompetence and power create the perfect bed for corruption. We need to fight graft everywhere.
Since market economies ended up begging state governments for bail-out funds, we need to shape up a new economic model with great respect for the natural cycles. That new model should be based on reason and control and yet still be entrepreneurial and flexible, locally and globally.

Posted by Thierry Flamant | Report as abusive

It seems to me the world economies are in a self perpetuating circle of disaster that has to be broken and throwing money at the banks, who are at the root cause, is not, in itself, the ultimate solution. Of course they need funding to maintain their liquidity levels but this has not made them able or willing to lend again. Banks have always operated a policy in “bad” times of calling in loans, bankrupting businesses, foreclosing on properties and then selling off the assets at whatever price they can get, showing the losses in their balance sheets but recovering the loss from customers by increasing bank charges and or interest rates on “good” loans. I don’t see them changing this philosophy. The problem now is that the extent of their potential losses, the so called Toxic Loans, is so great that if they follow their normal practice they would all be bankrupt and hence the need for government bail outs.

The proposals for a “Bad Bank”, or even a State Bank, I believe has its merits as long as it is handled and controlled in the right way. I wonder how many of the Toxic Loans would be recoverable if the borrowers could have their loans restructured to make them affordable, in the shorter term, particularly mortgages. This would enable people to remain in their homes, stop the foreclosure sales, which is helping to depress the property market, as well as taking out of the market all the properties currently for sale by owners trying to sell in order to reduce their burden of debt. This action would enable the property market to stabilise more quickly and the removal of these loans from the banks balance sheets would free up funding for mortgages to those wishing to buy and able to do so as well as financing good businesses.

Properly managed the Bad Bank may well recover many of the debts, albeit over a period of time, but at a much lower cost to the taxpayer than some of the policies currently being promoted. It seems to me that if no direct help is made available to both home owners and good businesses what we will see is more foreclosures, more businesses laying of staff or becoming bankrupt resulting in more unemployed people unable to keep up their mortgage payments followed by more Toxic Loans and the banks needing more funding to cover them.

Posted by Adrian Head | Report as abusive

I am one of the increasing numbers of persons who have consistently shown that the Banking System and Exchanges Regulatory system as it exists and the Regulatory system direction belong to Jurassic Park. They have outlasted their time, by being supported by Advanced Country Governments who also foist these on the rest of us. In Kenya, Mpesa the SIM based money transaction system has several times the number of customers as banks and has shown that the banking system is a dead weight. In Sri Lanka, we proved that our equity conversion of rehousing (of slums at that!!) is superior to all the jacked up methodologies of loans and collateral. Enterprises all over the world have proved that the Accountant and the Lawyer in commercial practice today are the wrong “storytellers”. As VISA founder and President of the world’s first trillion dollar organization Dee Hock put it, we have to discard the old “storytellers” and create the finance industry that matches our times. Otherwise the Western Taxpayer will just be bailing out the source of ruin so that they can crash resoundingly again. That time a trillion will be surpassed as the unit of bail out calculation.

Let’s put aside our anger and think carefully about what we really need. Because being angry with Banks or Banking regulators or Governments are wasteful exercises. We will have to spend more money to investigate and also spend money on maintaining Jails.

If you truly believe in Capitalism & Free Market, then you have to let it go through its natural flow. We are all afraid and it is affecting our judgment.

Blaming conspirators and Secret world powers is again useless because, if they are indeed very powerful then you cannot do anything against them.

But I remember a western leader/philosopher who said, Democracy is bound to fail because once people understand that they can vote themselves unlimited money, the system will fail.

What that guy was saying is that people should not be allowed to vote themselves money. But this is exactly what is happening in US and Europe where Banks are using their votes (purchased) in Parliaments to vote themselves easy money.

I am completely sure that we should allow everyone to get the same opportunity. Not just farmers or auto companies or Banks but all other producers.

Meaning if someone is making any product, he should be issued subsidies for producing it. That subsidy will ensure he continue to manufacture that product and provide economic growth. His earning will contribute to purchase more products from others.

When some products are not sold out, Government should accept the products and can issue around the world as donations just as it does today with agricultural products.

The Government will become more powerful than what any war machine can achieve.

All Governments can do the same. Japanese can donate cameras. Chinese can donate cheap toys. Indonesia can donate handicrafts. Important is start giving money for production rather then GOLD.

The method of printing money based on GOLD is the single most anti-Capitalist element which is causing all the economic disasters. The reason is simple.

When money is printed for Gold, Everyone will sooner or later search for gold. It allows them to print money and issue it to others for interest.

So why waste time working. Start finding ways to get gold. right? Stop that and Capitalism will be a smooth system of never-ending growth. Because only production will provide money. Governments will be there to regulate any products that are found useless or unwanted.

For those who are wondering why Islam is growing, please learn that Islam forbids usury. Against all media advertisements against Islam and branding of Islam as bad extremist religion, people are adopting Islam. Even in modern country which provided western style economic growth such as Malaysia and Turkey, Islam is growing. This is because of the Corruption of Capitalism with extreme usury. Productive activities are not valued correctly but is being suppressed. This is forcing people to find alternative Governments which today is only Islam.

In Eastern Europe and Russia people are yearning for the return of Soviet style Socialist Government which provided money for work and not credit.

I am not a Muslim and I urge all thinking Capitalist to start understanding the true danger ahead and start amendments.

Posted by VelShan | Report as abusive

Dear Prof. Schwab and other Davosians:

It is a natural, innate human tendency to seek to accumulate enough means to overcome perceived future threats to one’s own well-being, and that of one’s family, friends, and even clan. Globalized commerce, finance, and population growth to 6.6 billion have amplified the natural tendency of people to accumulate their means to an extent that is now threatening the viability–the genomic relevance–of our species within our living biosphere’s ongoing “mandate” to sustain Life. This is why the Davos gathering has such import: a new framework for a “sustainable capitalism” is badly needed. And bad behaviors have to be curbed without damping the creative spirit of entrepreneurship that yields so many astounding solutions to societal problems. We don’t need immense new regulatory superstructures. Taxpayers don’t have the means to support regulatory police states. But all people do have the means to insist on healthy bodies, communities, and ecosystems as their birthright.

Governments that have the capacity to regulate commerce within capitalist frameworks also have the power to harness this natural human tendency, and bend it towards a broader sense of “means”: namely, the means of our living planet to sustain ourselves, our communities, and our nations. Specifically, governments that have the power to tax corporate income could apply sustainability performance metrics to their taxation models. Corporations that achieve “top quintile” sustainability performance metrics in a two-year cohorts of similar SIC-code businesses, could be given tax-free status. Imagine it. All others in the cohort would receive their normal income taxes. Every two years, for-profit corporations would have the opportunity to be re-scored in comparison to their peers. Successful companies would attain “E-Corp” status (short for “ecological corporation”). But this status could be lost due to competition from below every two years. The pond would turn over.

Such an iterative system would harness the modern profit incentives that drive individuals and corporations, towards broad-based sustainability outcomes, in a manner that would reward and recognize that their “green” efforts are actually lowering the carrying costs of their governments–and deservedly so! Focusing the profit-seeking behavior of individuals and corporations on the “triple bottom line” of true biospheric sustainability is the challenge of our day, our century. A simple tool like the incentive of zero income tax for “top quintile” sustainability performance would represent a major “stimulus” on behalf of a smart and sustainable capitalism.

I welcome further input opportunities, if you think this idea has merit.

Posted by Greg Cumberford | Report as abusive

Klaus, that’s a great question, and I’m not sure you will like the answer. This medium is one of communication, and that requires a significant personal commitment. In my opinion, the most honest dialogs occur on bulletin board-type forums that cater to specific subjects (like say finance) and allow people to post anonymously. Although some people abuse the privilege, anonymity invites honesty and all ideas have to be judged on their own merits, not the name attached to them.

As for the question everyone is answering that you didn’t really ask, how to fix this thing… I think, at least in the USA, it’s a couple of things. First is an over-reliance on credit. We’ve got to turn away from that and encourage not only individuals to save more, but also companies. Problem is, this is counter to the belief that spending is what drives the economy. And I do expect it will hurt a bit at first, and may require the banking business to downsize, but it is necessary.

The other thing, which is somewhat related to saving: we need to encourage, and perhaps require, companies to pay dividends instead of keeping all their cash. This will do a few things. First, it will remove much of the speculation. Much of the “money” lost in this crisis was never actually money at all, but simply speculation in the future value of corporations. With dividends, price/earnings ratios are easily calculated to set the value, and the more CEOs steal the earnings, the more it depresses the stock. This will restore some honesty to the system, but it might require a hard pill to swallow for our current Democratic administration: cutting or eliminating capital gains taxes on dividends. I’m neither pro- nor anti- tax here, because I know in the end all tax is passed on to the consumer. But the psychology of it affects people and has to be dealt with.

Posted by Proton Soup | Report as abusive

The justification given for the bank (and insurance/financial services/brokerage/auto) bailout was that they were “too big to fail.” No one should be too big to fail under capitalism. They should be free to fail just as they were free to succeed. Rather than an ill-conceived, knee-jerk, panic bailout with borrowed money by a basically bankrupt country, they should have been busted up into their parts and the viable parts sold off to help offset the bankrupt parts.

It would be ridiculous to think that someone who is virtually bankrupt would go out and borrow (if they could) a large sum of money and take it to Las Vegas and place the borrowed sum on a roulette wheel thinking that they would be lucky enough to bail themselves out of that debt, but that is exactly what our government has chosen to do – and it has not worked, and had about the same chance of working as the roulette wheel.

Now, it appears that we all get to experience first hand what the word “hyperinflation” means, probably sooner rather than later with the new “stimulus” plan, which will probably just stimulate the money supply more than anything else…

Posted by Cathy | Report as abusive

When toxicity is inflicted with potentially lethal agents at dosages which kill 50% of the conscripted receipients (LD50) the experiments are halted by pathologists as it is known and guaranteed that LD70 or greater will wipe out the entire ‘population’. Also, serious epidemics, unchecked, coalesce rapidly into torrid pandemics with serious global consequences. It is not just foot and mouth, it’s, BSE too. The wretched toxic Bankers having released economic ebolas and marburgs simultaneously, surely, must be cast off on a far away desert island to spare the rest of commerce and industry from getting wiped out?

Posted by Monawar | Report as abusive

this comment is as true as that tons of sickly swirling air polution effects our climate … there are many living in 55 states of denial in the US , a false cosmetic lie … obsessive compulsive illusions of being bulletproof as if life is a computer game .

while bail outs help stop the market panic short term they are a total waste of needed capital .

time to prepare them for the incovenient truth … buried as they fall for their inhumane ways of doing business … strength is in righteousness … the strong survive , and the vacuum can also be filled by government sponsored co-operatives where needed , those who play fair for the common good… an equilibrium of government and private business activity … it is like a natural order of balance .

but a sad fact is a lot of good people are financially trapped in these failed entities… it’s also like helping the morgage defaulters , some are from over indulgent selfish greed , some from inoccent circumstances …. which ones do we help first with our charity ? work it out quickly or the wasted $$$ supporting moral cowards will be a global disaster .

Posted by Harry | Report as abusive

You in the billionaire class, you elitists:

Fatally missing from your proceedings is the addressing of the inextricably entwined collapses of the world economy and of ecological services forcing mass extinction and, sooner than later – human extinction.

You folks have failed to factor in the life-support sustainability of the earth in your ruthless increase in wealth at the hands of the world’s peoples.

To avert looming extinction, the World Economic Forum must face the direct link between unregulated financial profiteering and the equally steep curve of the uncontrolled rate of its component rapacious consumptive-driven, greed-caused resulting climate change head-long descent into planetary environmental complete holocaust.

Real wealth has nothing to do with the non-productive gains realized from the financial bubble, now vanished.

Real wealth is measured by a steady-state, sustainable economy based on zero carbon emissions, reset to a CO2 neutral flux, an economic activity to 5% of the current levels and a redefinition of the global economy into a constellation of relocalized communities based on bio-regional determinism, watersheds, and local access to necessities of life, education, culture, health care for all.

Well the comments here answer part of your question: if there is a mechanism for getting focused answers to the question you actually want to ask, this is clearly not it!

Something like a semantically-enabled wiki, with some level of permissioning and editorship (AKA gardening) would be a better route.

The technology to do this is not quite there, but it would help to have something where the ideas people put up are expected to reference established art wherever they can. Then if the referencing was somehow viewable or navigable, those wanting to make sense of the screed of comments and ideas could navigate things in the order in which they link into the wider global and academic conversations. Even original thinking, if it has value, is an original bringing together of existing thinking and existing facts.

At present the underpinnings of such a thing are in place in the form of the semantic web techniques and some of the existing research in semantic media wikis (I could provide references) but the imaginative stuff needs to be done.

Posted by Mike Bennett | Report as abusive

MY SEVEN STEPS TO SAVING AMERICA

Taking toxic waste (In this case loans that are never going to be paid) and moving that waste to another county (in this case the US Treasury), then shipping it back 5 years later to the county it came from miraculously making potable soil is irresponsible dreaming!

STEP 1 (STOP FEEDING THE LIES)
The first thing that the President can do is stop the phoney-baloney that the Treasury Secretary, Federal Reserve Chairman, and people of the ilk of Robert Rubin, and the Media Like the New York Times are serving up to the public. ALL OF IT to date is complete and utter hogwash. The public can smell a rotten egg and if Obama doesn\’t come to terms with that fact quickly, then he will not spend more than one short term in office.

STEP 2 (BECOME REALISTIC)
All of this nonsense about the Government taking the failed debts of the banks \”temporarily\” to be repaid later is an effort to hide the fact that the Plutocracy of America is more important than the rest of the American People and as they all run for cover the rest of us will be left holding nothing.

STEP 3 (STOP PRINTING MONEY)
As the Goverment continues to print new currency at an alarming rate (that I might add is no longer reported due to M3 no longer being published), we risk Weimarian inflation. We will be carrying 100 Billion US Dollar Notes in the next 5 years at the current rate of inflationary dollar creation.

STEP 4(REVITALIZE MODERN FED.RES.GOLD CERT. RATIO)
There is no solution to the current financial problem that we face, other than creating \”The Revitalized and Modernized Federal Reserve Gold Certificate Ratio\” as per Sinclair.

STEP 5 (HIRE RON PAUL AS SPECIAL ADVISER)
Obama should also make Ron Paul his Special Advisor to work with Volker.

STEP 6 TELL THE ENTIRE COUNTRY THE ABOVE AND EXPLAIN TO THEM WHY IT IS NECESSARY.

Let the Bankers and the Motor companies and any other company that has failed, to fail. Then you will have the trust of the people and other Nations.

STEP 7 (USE THE BIBLE AS YOUR GUIDE)

That’s my solution and it will work if Obama tries it.

Posted by McGregor | Report as abusive

Post Offices are everywhere and the safest money houses; they should arrange all transactions including mortgages and insurances. The taxman, who knows all about everyone and only takes presently can also give timely advice, arrange extra time to pay and arrange above all, good financial partnerships or ‘marriages’ between the rich and ‘poor’ to benefit all citizens equally.

Who needs greedy Bankers who have disgraced and violated the Founder of The Bank of America.

Posted by Monawar | Report as abusive

Putin and Wen pointed towards the politics in the US and the UK and partly they are right.

Wrong macro economics and lack of regulation allowed the bubble to grow until it was not controllable anymore.
So what have we learned out of that? Change the politicians in the US(already happened) and the UK(will happen).

I would like to add another culprit to Putin and Wen`s point of view: US/ UK MBA mangement culture,share holder value culture and greedy irresponsible CEOs sometimes called “leaders”.

This overpaid, short sightened, personally not responsible parasites on top of huge companies should be made personally responsible for losses occured.
They must loose their houses and not receive bonuses instead.
Obama was rightly angry – there should be a mini revolution and we should throw this CEO bankers, Madoffs in prison and confiscate their money to build schools and help the poor. Instead their institutions get our money and we get their debt – hey what a good deal – how will Obama explain this to his citizens!

Run companies with personally responsible “entrepeneur style” people and see what will happen. I can give of course one example: Porsche. Their CEO is personally responsible and would have lost his house if he would have got it wrong – but he hasn`t.

Finally leave the entrepeneurs alone to run succesfully their companies and look for a social market economy as the new third way as obviously capitalism and socialism have failed in this world.

Posted by Karlheinz | Report as abusive

No bailouts, no fiat currency, no federal reserve, no government debt, no financial ‘industry’. Only goods and services should be traded in the real economy. Credit default swaps should be declared void due to force majeur.

[...] Nevertheless, World Economic Forum President Klaus Schwab set an excellent example (and got a very healthy response): [...]