Saturday, December 13, 2008

Letters to the editor : Baleful bailout mantra
The Financial ExpressPosted: 2008-12-13 01:00:02+05:30 ISTUpdated: Dec 13, 2008 at 0100 hrs IST
Rama Bijapurkar’s article ‘Problem isn’t consumer demand’ bats for ailing companies. She pleads that the consumer is too small or well-preserved by his/her own prudence and does not need any stimulus. Big companies are cash-strapped and need to be helped. The nice-sounding reason for this is that if companies fail, people lose jobs and current problems will snowball. A few things may have to be put in perspective. Recession implies piling up of stocks owing to dwindling demand. Injecting funds through bailouts or facilitating liquidity through banks to companies will mean that consumers lose from both ends. Price cut is ruled out in seller’s market and private losses are socialised. The fittest survive in a free market. If firms have over-leveraged and made a mess, there is no reason why government should help them to clean up. It’s a win-win for companies who need to give up neither control nor revenues.
Subhashree Kishore New Delhi

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