Opinion

The Great Debate

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.

Comments
282 comments so far | RSS Comments RSS

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
 

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