We are reading different reports of the impact of the US Sub Prime Mortgage fall out on developing markets and emerging economies. The reports unfortunately have to rely on information which are handed over to you by the administrations and regulators, who have the powers to remain opaque.
Given the levels of visibility reached through satellite imaging techniques such as Google Earth, it is surprising that in large financial transactions running to billions of dollars, opacity stares at you. The crisis which is purportedly created by a few banks, seem to have had regulatory sanction, as you find the Regulators coming out openly in support of them, with the public fund. The Regulator in UK has come out openly to save a bank and the US Fed is reportedly injecting billions to allow some of the entrenched entities to move out in a more orderly manner. In a mature functioning capital market, it is indeed strange that we are seeing certain Regulatory actions, which can be clearly interpreted to be in support of defined entities who have abused the rules.
In such circumstances, given the opacity of the transactions, it is but natural that one would come to the logical conclusion that the excesses committed by these entities, have been enjoying the Regulators tacit support all along. No wonder, RBI governor in his inimitable manner has warned of surprises and indicated recently his resolve to take "unconventional" actions as necessary.
All these point to more major events in the immediate future. The tremors of Sub Prime Mortgage, are still traveling through the depths of integrated global economy sea. One is not sure where it is heading and which is the shore it is going to hit. There are no sensors to track this "Tsunami"(financial) and predict land fall.
Planners may be warned to plan for the landing and put in place emergency mechanisms to evacuate and provide "First Aid"
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