Kenichi Ohmae, the Japanese consultant and public intellectual, says the bailout will have to be global and puts the price tag at $5 trillion dollars when all is said and done.
Treasury Secretary Henry Paulson’s $700 billion plan to buy devalued assets from financial companies is “a joke” because it doesn’t go far enough to calm markets, said Kenichi Ohmae, president of Business Breakthrough Inc.
Ohmae, nicknamed “Mr. Strategy” during his 23 years as a McKinsey & Co. partner, called for a $5 trillion “international facility” to be made available to financial institutions. The system could be modeled on one used by Sweden during its banking crisis in the early 1990s, he said…
One way of funding the $5 trillion facility would be through contributions from foreign exchange reserves in China, Japan, Taiwan, the Gulf states, the European Union and Russia, Ohmae said…
Ohmae compared the current financial crisis with Japan’s 15-year economic decline that began in 1989. Both started with a property bubble, which wiped out companies’ equity when it burst, and like in Japan, the current one could lead to escalating bankruptcies as banks worried about their own survival rein in lending, he said.
The financial-market upheaval may lead to slower growth in China and the reversal of the commodity boom as ship orders are canceled and steel supply dumped, said Ohmae. What Ohmae called Japan’s “Viagra” economy and Australia’s “dig and deliver” boom may also fizzle as China weakens, he said.
Against the backdrop of a potential global market panic, Paulson’s plan is insufficient, said Ohmae…
“He wants to fix problems one by one as if he were still the chief executive officer of Goldman Sachs,” he said. “He has to take his CEO hat completely off and come up with a systemic solution as opposed to a one-by-one solution.”
