Article April 20, 2009 Issue

Rethinking the global economic crisis

BY COLLEEN DOUGLASS

Warren Buffett, reputedly one of the greatest financial gurus of all time, apologized in February of this year for misjudging the conditions in the finacial markets. In a letter to his investors, he wrote, "I made some errors of omission... when new facts came in that should have caused me to reexamine my thinking and promptly take action." Last year, Buffett's Berkshire Hathaway saw a 62 percent decline in profits. His company hasn't been alone in reporting diminishing returns.

Buffett's honesty offers a refreshing alternative to the "blame game," where everyone accuses someone else of being responsible for the financial challenges the world economies are facing. Many key players have failed to see, or at least acknowledge, the roles they've played in the disaster, which has involved people being unwilling to work together, lending quick and easy money, producing products that don't reflect current buying trends, encouraging buyers to take on mortgages they can't afford, and so forth. While financial wizards grope for solutions, the continuing self-interest of other "experts" has been exposed.

Meanwhile, world leaders are trying various solutions geared to help the global economy as well as their own nations' financial markets. Different countries have approached the challenge in their own ways, looking for packages that ensure people will keep earning, borrowing, investing, saving, and purchasing—key elements that grease the engine of the credit markets. All too often, the very experts to whom they would naturally turn are suspected of being the ones whose misguided judgments precipitated the crisis in the first place. Adding to the confusion, deep divisions exist between different economic theories.

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