Part III - The Solution

What's the use of discussing the problem if one doesn't provide the solution. So this it then, let us read my version of the solution to this issue.

As the boom began from 2003 and lasted till 2007, the fall will also last till 2013 or 2014. Most of the solutions require a long term approach to resolving our current conundrum. I feel we should stop the austerity measures as they aren't producing the desired results. On the contrary austerity has led to reduced consumption, lower tax collections, high unemployment and a feeling of helplessness among the masses. We need to complement the Monetary Stimulus i.e. the Quantitative Easing by USA and England and Long Term Refinance Operations (LTRO) i.e. lending by the European Commercial Bank at 0% for 3 years with Fiscal Stimulus as the money supply has not met with money demand which has led to inflation as the system if flush with liquidity and there are no other options but to speculate.

EU nations should revert to pay-cuts, pension and labour reforms to make their more productive and reduce taxes to fuel consumption. People will need to accept the fact that the days of superb social security web are over. In the USA banks should be made to realise that the funds that have been provided to them are for lending to the people and not for prop trading. The US government should come up with large scale infrastructure spending measures and alternate fiscal stimulus measures to create employment. We need to emancipate people from their current state of mind. 

EU will need to work together for a solution for the debt-ridden countries, they should be provided with more liquidity and a long term aid package should be finalised without penal austerity and fiscal goals. This will help to remove the insecurity and provide a definite road map for the revival of their Economy and re-entry into the Debt Markets. The current indecisiveness and disparate solutions by different countries needs to go, the stronger countries like Germany, Finland, the Netherlands and Norway need to sacrifice for the long term survival of the Euro. 

For India these measures will lead to higher prices and even higher inflation. If we exclude fuel price inflation from the indices we will see that the other components like agricultural and manufacturing prices can be tackled my taking prudential steps like de-bottlenecking the infrastructure and providing impetus to agricultural reforms. I feel the major beneficiaries of subsidies have been the rich farmers and the middle class, we need to provide them on a need basis and to the deserving. And we need to start making tough decisions pretty soon or the situation will be such that decisions will be made for us. I feel that the latter situation will prevail. It's human tendency to procrastinate and we are seeing this all over the globe.

Let us see what the future beholds.