As the Annual World Economic Forum (WEF) commenced progresses in Davos, Switzerland, Professor Togba-Nah Tipoteh, the internationally renowned Liberian economist, has sent a Message to the Forum with a warning that another world financial crisis is highly likely to occur by the year 2020.
Professor Tipoteh issued this warning mainly because of the Deregulation Path that the Trump regime is most likely to pursue upon taking over the government of the United States of America (USA) next week.
Dr. Tipoteh recalled the occurrence of the 2008 world financial crisis, which came out of the deregulation policy and practice of the Bush regime of the USA. In his Message to the WEF, Professor Tipoteh reminded the Forum of the following points: 1. From the late 1920s, when the major financial house in New York, USA, were having mostly their own funds in their investment portfolios, they made lending decisions cautiously; but, after World War Two, when outsider funds made up the bulk of their investment portfolios, they did not follow standard rules and procedures in their lending. 2.
In the use of sub-standard rules and procedures for lending, the big financial houses, like Goldman Sachs, Lehman Brothers and the American Insurance Group (AIG), flooded the loans market to the point where home buyers, mortgage holders, could not meet up with their obligations to wipe off their mortgages.
This then became the result of the emergence of the sub-prime market. The former Chairman of the Federal Reserve of the USA, Dr. Alan Greenspan, praised the sub-prime market because he considered it to be stabilizing within the context of the operations of the free market economy. 3. Instead of being stabilizing, the sub-prime market became destabilizing, as it was anti-growth with world level consequences manifested concretely in the low to negative economic growth-experiences in the industrialized economies, including the economy of the USA.
Dr. Tipoteh observed in his Message that just as the 2008 world financial crisis had negative consequences for the poor countries, like Liberia, the pending world financial crisis will definitely have similar consequences. China managed to avoid the consequences because the economy of China is not dominated by the world free market system.
While the industrialized economies were struggling to attain positive economic growth rates after the 2008 world financial crisis, China had a growth rate of nearly 8 percent, falling slightly from its longstanding double digit growth rate of 10 per cent. Liberia will continue to experience the negative consequences as long as the economy of Liberia continues to operate in the economic mode of producing raw materials mainly for export, consistently and persistently overlooking value addition or manufacturing, using Liberia’s raw materials.
Professor Tipoteh ended his Message by stating that the upcoming crisis could be avoided were industrialized economies to be governed by regulation rather than deregulation. Dr. Tipoteh reminded the WEF that it took the Bush and Obama Administrations over USD 800 billion, respectively, to bail out the big financial houses from the 2008 financial malaise. However, the greed-driven decision making of these house continued, as seen in the USD 21.2 million yearend bonus that was given to the Chief Executive > Officer (CEO) of Goldman Sachs at the end of 2012.