There is quite a number of articles about the US Government’s dilemma with their economy. I thought about a month ago when I wrote about the US Fed cuts, their economy would stabilize.
Then there is this news (from Channel News Asia) recently about Citigroup’s announcement of 17,000 lay offs for April of next year. Now this is something that should really rattle USA. For one, Citigroup is the second largest banking group in US. For a country as America that would entail a certain level of stability and a sound financial health.
Apparently, the lay offs are due to their massive losses from delinquent mortgages. They are not able to cover up for these losses. Normally, write-offs would be a standard operating cost for banks. Whatever happens, there will always be people who will not be able to pay.
This time though, there is a significant number of write write-offs. If I’m not mistaken, the range is between 8-11 Billion Dollars. In lieu of this, the Abu Dhabi government is reported to invest 7.5 US Dollars in exchange to 4.9% worth of equity units.
This means that Abu Dhabi government will own that same percentage of the second largest banking group in America. Although they have waved the rights that common shares would normally have, like designating a member in the bank’s board of directors, I think it would be taken into opposite lights by US citizens.
Still… well it is their country. So far, Asia has not manifested any adverse reactions to US’s predicament. Here in Singapore, real estate is still booming including tourism. At the very least, most of the countries here has not been daunted by what’s happening on the other side of the globe.
I think it’s safe to say that investors here are still confident that they will get returns from their money. I have always believed that a country can only be as strong as its people. If the problem of Citigroup is caused by delinquent mortgages, there are a few things that can be deduced from this.
One, the people are getting more irresponsible. Paying debts are individual’s responsibilities. The same as it is their decision to mortgage their houses in the first place. Second, probably the cost of living in America can no longer be supported by the minimum wage. That means they should start rethinking all their Fiscal and Monetary policies.
These are just a few of the many reasons. Bad judgment call from officials, inadequate planning or even wrong attitude from the masses. The list can be very long, and Economists can stay up for days, weeks and months trying to solve this problem.
One thing I’m sure though. If the rest of America does not take this seriously and remain lax, they would still be forced to suffer another recession. That wouldn’t be good.
With a lot of economies currently surging upwards like China, America couldn’t afford to slack anymore. Otherwise, tables might actually turn on a different direction.
Note:I have been too engrossed with my social life recently that I forgot something that I am really passionate about. I hope I corrected that right now.