US Congressional Submission
Global Financial Solutions for a Growing World Economy
The advent of new world financial markets from emerging nations along with instant global communication access has fostered the growth for massive investment across many sectors. This has fueled the ability for capital access to far reaching places as well as from other nations and financial centers to the US and other major financial centers. Much of this growth has been driven by information availability combined with ease of travel that would have otherwise been less available due to previous limitations in years past. The combination of many factors has resulted in large of pools assets that have demanded superior returns beyond market growth factors as well as virtually instant liquidity for any reason.
For these reasons and more, the world capital markets have swelled to such vast proportions that the overall system has resulted in shorter-term outlooks as opposed to long-term investment strategies. The core of any sustained growth requires planning, execution and long-range commitments. Fast track results have given way to traditional structure. Benefits under confident investor sentiment are obvious: building, creation of support infrastructure, consumption of goods and much more. However, the moment any lack of confidence occurs, the knee jerk reaction is to withdraw and wait for stabilization. The US and other world economies are now experiencing this.
On a macro level, and because of the globality of growth across many borders of developed or developing nations, there is no possible solution plausible that can support the needs of only one nation. Therefore, there must be other considerations in fashioning a financial safety net, yet allow for free enterprise to express itself to the highest level. Also, there needs to be something for the average tax payer of any nation to benefit from for helping to create this safety net.
By using an existing and recognized organization, and perhaps one that will help improve international relations and peace, the World Bank is positioned to create a new division that would report to it and use its existing Governmental relationships for support and participation. Starting with the G-8, G-9 or more nations, the World Enterprise Organization (WEO) would be created as a quaisi international investment bank. It would require leadership from individuals that had both security clearance levels as well as virtually incorruptible statures (noted individuals that have made considerable wealth in the financial markets).
The key would be the ability of this organization to provide investor confidence and also have a profit motive for its Government backers/shareholders to support world financial liquidity, particularly in the debt and public stock markets. The ability to support freely traded issues, based on certain fundamental analysis would result in an increased velocity of money and offer the immediate liquidity that many institutional investors demand.
This is a relatively simple concept but is rather complex in all of the executable components. There would need to be the ability to also provide preferential funding to essentially “take over” troubled institutions and turn them around with new found liquidity. Lehman Brothers, Bear Stearns, General Motors and AIG are prime examples. Given sufficient capital and proper management, each of these Companies could be turned around and essentially “resold” back into a market place with investor confidence.
In the secondary markets, particularly revolving around debt instruments, the ability to have instant liquidity and stabilize a soft or volatile market would be essential tasks of the WEO.
The real beauty of the organization is the cost. Each participating and recognized nation would pledge $10 Trillion Dollars or equivalent of to be printed, currency. This would NOT be inflationary because it is investing into this organization whose charge would be to assist the market place through stabilization and access to liquidity. Once there is confidence back into the market place, virtually any position owned by WEO would be reacquired in part or via merger, acquisition back into the free market system. And in most cases, this could clearly be a very profitable venture that could offset respective taxation to the ultimate tax payers to whom their Governments need to be accountable to.
Because there are trillions of dollars at stake and there are not trillions of dollars or Euros in sufficient quantity to allow for global liquidity, this organization would create the needed stop gap and investment confidence.
The same would be true in a market that is over heating where the WEO could step in and exert the opposite pressure to slow things down. What a healthy world economy needs is stable and controlled growth, not get rich quick schemes and huge value swings that hit the core of the investing public and retirement plans.
This is not a blame game program. We, the world, are here now and we need a big solution to fix the problem and stop pointing fingers as to who is at fault.