Wall Street Coming to a Dead End

For years the Wall Street Index has been the biggest stock index in the world and also the most influential one. The bull has been raging and alive since the Great Depression during the 1930s and till date holds the key to different world economies, thanks to globalization. But what was once a boon now may have met its most formidable foe in the form of credit crisis.

The American spending power is something which everyone is aware of. And this is where the trouble began, according to experts in the field. They are a consumer based economy more than a manufacturing based one. Being one of the richest economies in the world, they could afford to do that, whereas countries like India and China are export based economies.

In other words, they manufacture stuff that Americans would want to buy. But the Americans were never satisfied. They wanted to buy more, earn more and buy more stuff again. But with the reduction in number of jobs in America and the economy being weakened due to the Bush administration's war based methodology, there was becoming a lull in the spending power of the average American. This resulted in a drop in the US economy which consequently led to a drop in the economies of third world countries whose economy was based on the spending power of the Americans.

The banks realized that in order to help the Americans keep spending they needed to have higher amount of money to spend in the form of credit cards and loans. This resulted in all the banks increasing the amount of credit available and loans were given out freely. Everything was being financed by banks starting from education to baby-care. However the trouble started when they were not getting paid back. Now the banks were running dry with no money coming back which was given out. And this is where the US government should have woken up and settled things then and there.

Instead they let the Americans spend even more, by waiving credit payments and such and in order to provide more money for the Americans to spend, the banks and the US government had to loan money from other countries like India and China. And these countries had to keep giving money, for their economy was dependent on that of the US. It was a high risk gamble they were playing, hoping they will win. However recent developments in Wall Street show that no one seems to be able to get away.

As days go by, major banks and companies are being either taken over by the US in order to save the country's economy or filing for bankruptcy like Lehman which is now bankrupt. This keeps the Wall Street index going down and down, and the worst part is that this makes a huge impact on the economies of other countries too. Indian and Chinese stock exchanges have taken a major hit due to the crisis situation in America and it is all now a downward tunneling spiral. Hopefully, the smartest minds in the world can do something to prevent this downfall or else, the world is going to end up flat on its face.