To Bailout or Not to Bailout – that is the Question!
This morning on 5fm, Gareth Cliff and his team spoke about the US bailout.
He asked whether you would bail out a friend who went on a spending spree and got in way over his/her head.
I guess a friend’s debt situation and the situation of million dollar companies doesn’t have the same consequences, but the principles are the the same.
In South Africa, I dont think Thabo Mbeki’s government, Tito Mboweni and the Reserve Bank received the accolades (I almost said credit!) they deserve for keeping the fundamentals of our economy as strong as they can under the circumstances.
We moaned and groaned at high interest rates and rising costs, but if there is an idiot’s guide to economics, I’m sure it will advise you to only spend what you have.
Up until now economies of developing countries have mostly been at the mercy of first world countries. Smaller economies were forced to keep sound fiscal policies. Our countries were expected to jump through hoops to get foreign investment and loans, rightfully so.
Would a third world country have received billions of dollars in loans to invade a foreign country though?
As for me, fortunately I don’t have to make a decision on behalf of a whole country, but I would only bailout a friend I could afford to give the money, without expectation of receiving it back and I would only do it one time.
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