Calming nerves

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Financial markets around the world were in turmoil following the failure of Lehman Brothers, one of America's largest and oldest banks, to find an appropriate buyer after it went bankrupt. Stock markets from Tokyo to London were also staggered as investors weighed the impact of a potential collapse of AIG, the largest international insurance corporation.

The world went haywire. The implications of a global economic slowdown are disastrous. We live in a global village, in an interchangeable world. What would be the impact on Egypt? We, in Egypt are obliged to ponder carefully the consequences.

Egypt, like the rest of the world, has fastened its economic fortunes to those of the United States. We in Egypt are paying an exorbitant price today. It is time to free ourselves from the shackles of American economic imperialism. Small wonder states in Latin America, America's own backyard, are throwing off this yoke. The economic stranglehold of the US has become an unbearable burden. Shares around the world are sliding at an alarming rate.

The American financial system is in dire straits. The New York Federal Reserve injected $70 billion of temporary reserves into the banking system today and $70 billion yesterday, the largest amount since the September 2001 terrorist attacks on New York and Washington. The American central bank has also provided billions of dollars through direct loans of cash and treasuries.

Overnight the cost of borrowing in dollars more than doubled to the highest since 2001. Tumbling commodity prices, including a 38 per cent decline in crude oil from a July peak, further complicated matters.

Then came the brouhaha surrounding "Fannie Mae" and "Freddie Mac", originally government agencies to assist the poor, but more recently, private cash cows for the rich. The government was forced to take over these mortgage firms to prevent a total crash of the US financial system, in the largest bailout in history. The Treasury Department promptly announced that it would pump $200 billion of fresh capital into both companies. This money is in exchange for warrants that the government can exercise to gain an 80 per cent controlling stake. This amounts to printing dollars and giving them to the rich in order to save the assets of the wealthiest members of society.

The US dollar quivered as investors sold assets across the board. Lehman's historic default is bound to have unmitigated consequences. Meanwhile, there are signs that the dizzying growth of the hitherto unstoppable Chinese economy is alas slowing down. That, too, would have grave consequences for the global economy. Where does all this put Egypt?

In Egypt, the Stock Exchange fell by 4.7 per cent on Tuesday, and throughout the week it fell by more than 10 per cent. Arab investors have lost a great deal in the past few weeks. The dollar soared as the Egyptian pound fell against the dollar. Ironically, the dollar is fast gaining ground against a number of currencies including the euro and the pound Sterling. However, we need not panic because that would only worsen the situation.