The risks of a global recession are rising. The social and economic costs of this meltdown are staggering. Unemployment has soared in hard hit economies. Many years of economic progress have been reversed and hundreds of millions of people are falling below the poverty line. The economic and political backlash has prompted several countries to take matters into their own hands, with Malaysia imposing capital controls, Russia defaulting on its foreign debt, and Hong Kong directly intervening in the stock market.
Protectionism is also on the rise as a result of economic hardship and trade imbalance.
The global capitalist system based on free capital flow and free trade is in great danger. The international rescue efforts led by International Monetary Fund have so far failed to contain the fallout. While the IMF has provided sizable financial packages to help the crisis countries avoid financial default, it is rather poorly equipped to stem investor panic and increase market confidence. Its call for long-term economic reform often amplifies those economic problems that causes market panic. Thus, alternative approaches are needed to boost market confidence and to stabilize currencies.