In September, when the financial crisis in the U.S. really started heating up, we were treated to good deal of unattractive crowing from our European and Russian friends. Nicolas Sarkozy, the President of France, announced that the time of “laissez-faire” capitalism, “not . . . constrained by any rules,” was over. Why, I wondered, had he not noticed that capitalism unconstrained by any rules had never been the order of the day and that for the last 150 years or so, capitalism, especially in Europe, had been hemmed in by thousands–actually, tens of thousands–of pages of rules and regulations? Dmitry Medvedev, the puppet president of Russia, told us that the age of U.S. economic dominance was at an end and that the world required a “more just” economic system. But that was before the price of oil had plunged from $145 to $65 a barrel over the course of a few weeks and the tsunami of credit woes that originated in the U.S. had made its way East to Europe and Asia.
How will this financial mess play out? No one knows for sure. Believing as I do in the resilience of capitalism and the resoluteness of the American worker, I suspect that things will sort themselves out in due course. (And how long is a “due”? That’s a good question that I cannot answer.) One thing that is becoming ever more clear, however, is that the economic situation in Europe and Asia is likely to be far worse for a longer period than in the United States. Writing in the London Telegraph today, Ambrose Evans-Pritchard observes that Western European banks hold about three-quarters of the $4.7 trillion in in cross-border bank loans to Eastern Europe, Latin America and emerging markets in Asia. This, Evans-Pritchard notes, is “a sum that vastly exceeds the scale of both the US sub-prime and Alt-A debacles.”
For the last few decades, the West has been pumping money into economic backwaters, taking care first to assure everyone that they were “emerging” markets. But what if it turns out that they only seemed to be emerging when propped up by easy capital, in the absence of which some or all of them reverted to being what they always had been, i.e., submerging markets? What then?
“Europe,” Evans-Pritchard observes, has already had its first foretaste of what this may mean. Iceland’s demise has left them nursing likely losses of $74bn (£47bn). The Germans have lost $22bn.” Demise? Iceland? Well, economically, it pretty much amounts to that: as a professor at the university of Iceland put it earlier this month, “Iceland is bankrupt. . . . . The IMF has to come and rescue us.”
But what happened in Iceland was only the beginning. The crash of so-called “emerging markets” is sending shock waves throughout Europe and parts of Asia. Evans-Pritchard sketches the dismal picture:
Austria’s bank exposure to emerging markets is equal to 85pc of GDP – with a heavy concentration in Hungary, Ukraine, and Serbia – all now queuing up (with Belarus) for rescue packages from the International Monetary Fund.
Exposure is 50pc of GDP for Switzerland, 25pc for Sweden, 24pc for the UK, and 23pc for Spain. The US figure is just 4pc. America is the staid old lady in this drama.
Amazingly, Spanish banks alone have lent $316bn to Latin America, almost twice the lending by all US banks combined ($172bn) to what was once the US backyard. Hence the growing doubts about the health of Spain’s financial system – already under stress from its own property crash – as Argentina spirals towards another default, and Brazil’s currency, bonds and stocks all go into freefall.
Broadly speaking, the US and Japan sat out the emerging market credit boom. The lending spree has been a European play – often using dollar balance sheets, adding another ugly twist as global “deleveraging” causes the dollar to rocket. Nowhere has this been more extreme than in the ex-Soviet bloc.
The region has borrowed $1.6 trillion in dollars, euros, and Swiss francs. A few dare-devil homeowners in Hungary and Latvia took out mortgages in Japanese yen. They have just suffered a 40pc rise in their debt since July. Nobody warned them what happens when the Japanese carry trade goes into brutal reverse, as it does when the cycle turns. . . .
Russia too is in the eye of the storm, despite its energy wealth – or because of it. The cost of insuring Russian sovereign debt through credit default swaps (CDS) surged to 1,200 basis points last week, higher than Iceland’s debt before Götterdammerung struck Reykjavik.
The markets no longer believe that the spending structure of the Russian state is viable as oil threatens to plunge below $60 a barrel. The foreign debt of the oligarchs ($530bn) has surpassed the country’s foreign reserves. Some $47bn has to be repaid over the next two months.
In a rational world, these developments would prompt our leaders to reconsider the utopian policies–underwritten, to be sure, by a healthy dose of the profit motive–to issue and guarantee such quantities of risky debt. It should lead to more responsible lending, i.e., lending that proceeds according to the checks and balances of a free market rather than one that is everywhere constrained by the socialistic imperatives of governments that grow ever larger and more controlling. In this world, however, I fear that what we will see are ever more meddlesome initiatives both in the United States and, especially, in Europe. Already we have witnessed tax-and-spend politicians seize upon the credit crisis to propose measures that would take the “private” out of “private property” and would deliver ever more aspects of the economy into the governments’ hands, aiding and abetting their increasingly ambitious efforts to “spread the wealth around.” I shudder to think what embracing such policies would portend for prosperity and freedom.
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45 Comments
1. AST:Fear not! Salvation is at hand! The One will soon sweep into office with his clouds of angels manning the bureaucracy and cure all our ills; provide free health care, free college and free homes for all; and unify us and all mankind under the benevolent government of the United Nations.
Nowhere to run to, Baby. Nowhere to hide.
Oct 26, 2008 - 11:33 am 2. Formwiz:The Dodds and Franks are invested in this mess any way you can imagine (lifetime, ideology, legal, etc.) and have to come up with something to keep it all from collapsing. This won’t make things any better, just forestall the day of reckoning until they’re retired or dead. Why people aren’t screaming for these people to be impeached, investigated, and arrested, I can’t imagine.
In any case, another reason why Pelosi’s super-majority is a really bad idea.
Oct 26, 2008 - 11:54 am 3. cfbleachers:Silly you, Roger. You actually believe that reasoned thought and rational behavior are capable when we mix global economics with social engineering.
The tectonic plate shift caused by the social engineering inspired lending jailbreak, doesn’t just rumble along the coasts of the US, as is now becoming apparent, even to the myopic French and their astigmatic brethren in Moscow.
What is not “spreading” is wealth, what is spreading…is the foundational crack in social engineering. Artificially cramming “socialist solutions” into capital market forces is like giving chocolate to our pet dog. We love chocolate, it’s such a treat…therefore we want the dog to experience it as well.
Sweet idea, ill conceived. The dog doesn’t process chocolate the way we do and we make it violently ill, perhaps kill it…with kindness. Socialists are best left to making music, movies, recipes and art. That side of their brain is developed, the other…not so much. Bohemian economics is an earthquake ready to happen.
Oct 26, 2008 - 12:10 pm 4. Taxpayer:Frank, Dodd, and Schumer - and a lot of other Democrats -should all be in jail. They were the proximate cause of this in the US via political manipulation of Fannie/Freddie.
The Democrats will eventually steal everything you own. They WANT you to be poor and dependent - serfs-to-the-state.
Oct 26, 2008 - 12:11 pm 5. hM:For some reason it never ceases to amaze me that people are still holding out hope that socialism is the cure to all man’s woes. Despite the fact that it has been fairly well established by now government officials shouldn’t be let anywhere near anything that has to do with money - even a balanced budge is beyond these people, after all - I find it both amusing and depressing to watch as people insist on stepping off the cliffs of reason to follow a utopian ideal that is little more than an odd, curling shape in the mist. Heaven forbid you should point out it has no substance because that’s just mean and only bigots, racists, and elitists would dare point that out.
But who am I to comment? I’m a conservative-leaning libertarian which of course means I automatically am allowed no opinion on this matter whatsoever.
Oct 26, 2008 - 12:24 pm 6. Hale Adams:I think we’re less likely to see massive government intervention in the economy nowadays than we would have seen if this had happened in the ’40s, or even the ’70s. Back then, “rule by the experts” was more-or-less unquestioned, thanks to what has been termed “political Taylorism”– Frederick Taylor’s ideas of industrial organization (”the one best way”) as applied to human societies. Nowadays, we’re a little more skeptical of the rule of experts, tired of being the raw material being processed to attain someone else’s idea of the perfect society.
My two cents’ worth……
Hale Adams
Oct 26, 2008 - 12:46 pm 7. John Skookum:Pikesville,
People’s Democratic Republic of Maryland
This cannot possibly end well. The world economic system is further adrift than ever. I fear it is all smoke and mirrors. Soon the only currency will be gold coins and ammunition.
Oct 26, 2008 - 12:51 pm 8. silvermine:No, I know plenty of people quite into rule by experts, who quickly poo-poo any opinion I have on anything because I’m not credentialed. They then pick their favorite elite (Krugman, whatever) and parrot a quote to show I’m wrong, without discussing any particular detail. No logical thought applied.
Oct 26, 2008 - 12:58 pm 9. davidingeorgia:AST…good grief, I was depressed enough already…lol
Oct 26, 2008 - 1:13 pm 10. davidingeorgia:Hale, I hope you’re right, but even if you are, with the majorities the Dems will have in both Houses (and it’s not like the Republicans in the Senate are much of an obstacle even if there were more of them), the Messiah [tm] are going to run roughshod over the rest of us for at least 2 years and are liable to change to rules to keep that advantage whether the American electorate likes it or not…”one man, one vote, one time” you betcha…
Oct 26, 2008 - 1:16 pm 11. Blogs For Victory » You Think Our Credit Crisis is Bad?:[...] ain’t seen nothing, yet - as Roger Kimball notes and quotes: For the last few decades, the West has been pumping money into economic backwaters, taking care [...]
Oct 26, 2008 - 1:22 pm 12. John Blake:Delayed since Orwell’s time c. 1948, the Crisis of Socialism is now upon us. Something-for-nothing, the pyramiding of ever more volatile financial instruments atop tottering piles of phony debt, has finally exposed itself for the Ponzi Scheme it is.
For some three generations now, those who experienced the 1930s Depression and survived World War II have engendered a “spread the wealth” mentality that stifles competition, innovation; radically compromises individual initiative and responsibility; blasts healthcare, pensions, self-reliant opportunity at their very root.
Collectivist Statists must always revert to eating their seed-corn. When previous generations’ hard-earned social capital –including education, merit-based employment, housing– has finally been expended by wastrel “populist” (read Socialist) regimes, the surprise is that economic pies cannot be re-distributed because there is no pie.
Libraries of studies, centuries of cruel experience attest that National or International Socialisms (Nazism, Communism et al.) rapidly degrade to nihilistic death-cults sacrificing acolytes in high proportion on Statist altars glorifying class (Marx), race (Hitler), sectarian dogma (Reformation orthodoxies, secular alarmisms, militant Islam).
Must this be our “human condition” or may timeless Enlightenment ideals exemplified by America’s founders, unique in history, somehow nurture individual aspirations that keep rapacious Socialisms and their atavistic, reactionary State at bay?
In matters of life-and-death it seems that Eliot’s “hollow men,” Hoffer’s “true believers,” benighted Islamists of every stripe will choose the latter. On the most basic level, if parents and children –families– do not soon band together in defense of Life, humanity will face a global Dark Age so destructive of civilized relations that no new Renaissance ever will, or likely can, emerge.
Oct 26, 2008 - 1:28 pm 13. JMH:I suspect that things will sort themselves out in due course. (And how long is a “due”? That’s a good question that I cannot answer.)
History says nine months, if there’s only minimal political interference. Longer if there is significant attempts to “soften the landing.”
It gets back to what McCain said (and Obama ridiculed) about the foundation of the economy - workers - being sound. This financial crisis, like most recessions, is due to a bunch of money being invested in unproductive ideas during a bubble. But money isn’t really a thing, it’s a measurement, and the recession is the after-effect of spending several years measuring the wrong things. Now the economy’s come to a halt while everyone is standing around reassing what’s what. It’ll take six to nine months to sort the mess out and start things flowing again.
But the more Sarkozy and like-minded bureaucrats try to “fix” things, the more interference they impose in the system sorting itself out, and the longer it takes. That’s a big part of what turned the 1929 recession into a 12 year depression.
So, I guess Roger is right - nobody really knows how long this will take, because we don’t really know what the politicians will end up doing.
Sigh.
Oct 26, 2008 - 1:39 pm 14. Pajamas Media » Europe on the Brink?:[...] Read the entire story here. [...]
Oct 26, 2008 - 1:45 pm 15. Bob:Yep, John B., things are bad.
Oct 26, 2008 - 1:51 pm 16. threedonia.com » Blog Archive » Helga Mae and Ivan Mac:[...] Roger Kimball has some sobering thoughts on the credit woes affecting Europe and Russia — and perhaps China. Check out Roger’s blog linked in our Blogroll. He’s also responsible for one of the better art books I’ve ever read: The Rape of the Masters. [...]
Oct 26, 2008 - 1:55 pm 17. RE:If Obama wins the election, America will have taken its dive on our watch. Even if McCain wins, there no evidence that the GOP will grow the backbone required to stop the government meddling that caused this debacle in the first place.
There is no consolation in someone else having it worse. Our generation dropped the ball big time.
Oct 26, 2008 - 2:19 pm 18. Michael C.:The loss of capital over the next few years will be so great that growth has to be stymied. Remember it takes about $65,000 of capital per cheap job. There is minimal need for housing in the US because of a large inventory so forget those jobs. Fortunately, we can send back our new immigrant population. That will help with unemployment. With the drop in demand for fuel, Russia Venezuela and Iran are in deep Doo Doo. If Obama is elected he will raise taxes so tax-free bonds are an obvious value. That means less money for job producing businesses. Look for a long slow business environment. Exports will shrink dramatically because of the loss of European and Asian demand. (Exports have been our major growth industry). Save as much money as you are able because there are going to be some terrific buys out there. The only question is when!
Oct 26, 2008 - 2:26 pm 19. Andrew X:Another good horizontal move would be to Pajamas own ‘Belmont Club’
http://pajamasmedia.com/richardfernandez/2008/10/25/eace/#more-683
….asking just how long such thinking can last. (”If something cannot go on forever, it won’t.” Tout fini.)
The thing is, what we are arguing with here is akin to the Muslim faith. It (socialism, leftism, etc) IS a faith. Simple as that. You can talk about dinosaurs with a creationist until your blue face is covered with a grey beard. Until they jettison their faith in the nanny state over and above all, or at least agree to stop acting on it politically (Impossible. Politics IS the faith)… you are trying to teach a pig to sing.
But remember that the US, militarily and economically, is the foundation of the West, even an ideologically corrupt West. Our backbone has ALLOWED such corruption to metastisize.
So maybe it really will require enough serious mushiness on the part of the US, (inevitable under the ‘O’ne) for the rest of the West to get it.
In other words, it will take an enormous catastrophe (”change”, anyone?) for even high school sophomores to wise up and say, “Ohhhhhh, I GET it! It DOESN’T add up!”
In line with this, as this all will hopefully provoke a conservative restoration in the US at some point in the future, one wonders how conservatism’s current willingness to take the fight for liberty overseas will fare. In other words, will Republicans sacrifice their lives, fortune, and sacred honor for the “right” to restore a socialistic status quo in Europe, etc?
Not likely. Not likely at all.
Oct 26, 2008 - 2:28 pm 20. Koblog:To John Blake (#12): how easily you praise the “enlightenment” for our prosperity while denigrating “sectarian dogma…” as if it’s by mere accident that the American people were once able to make our Constitution work.
Ever hear of the Protestant Work Ethic?
Ever read the scripture,
“If anyone will not work, neither shall he eat.
For we hear that there are some who walk among you in a disorderly manner, not working at all, but are busybodies. Now those who are such we command and exhort through our Lord Jesus Christ that they work in quietness and eat their own bread.” (II Th 3:10-12)
This is what once drove Americans, not some French idea of “enlightenment.”
It is the abandonment of the Protestant Work Ethic and replacing it with a philosophy of “something for nothing” and “what’s yours is mine” that is destroying us.
Oct 26, 2008 - 2:32 pm 21. Fresh Bilge » An-ti-ci-PAY-shun:[...] of other economies through monetary policy. That’s pretty funny. Would that it could! Second, Roger Kimball considers the banking crisis in Europe, which may prove much more severe than its US counterpart. Posted at 6:23 PM | [...]
Oct 26, 2008 - 3:23 pm 22. Frank:All I can do is thumb my nose and say “haw haw” to the rest of the world.
Screw those crap talking, condescending jerks anyway. A collection of Nanny States, Tyrants, and Communists
Oct 26, 2008 - 5:35 pm 23. ed joyce:And not only are European and Russian banks in trouble, so are Chinese Banks:
http://www.theaustralian.news.com.au/story/0,20867,19067992-36375,00.html
This article, written in 2006, outlined over $1 trillion of bad loans held by Chinese banks. Having lived in China the past four years and hearing through the grapevine that non-performing loans (NPLs) now exceed $1.5 trillion, a mild economic shock could collapse this house of cards in a matter of weeks.
In the China’s case, it wasn’t capitalism that lead them to this quandary. As the article states and my contacts confirm, it was cronyism and corruption — million dollar unsecured loans to CCP cadre — that will lead to the collapse. (Although I can see the few lingering Maoists left in the system will blame the collapse on capitalism and possibly herald a new cultural revolution. Do not be in China when that happens!)
With the economies of Europe, Asia and South America down the tubes, we might get by with a mild to severe recession. On the other hand, it might be a good idea to stock up on food and ammo, just in case…
Oct 26, 2008 - 5:38 pm 24. Bart:#8: You should come back with, ‘that is argumentum ad verecundiam, one of the logical fallacies identified at least as far back as Aristotle in his Sophistical Refutations’ in the third century BC.’
That said, people need to realize that all we are talking about here are the dynamics of money, which is a question of how resources are allocated, not of what resources are available. Which is to say, we are in a lot less trouble than you may think if we just keep our heads and don’t go off in a panic ceding control over our lives to those who preach soothing words in exchange.
Most economists agree that the Great Depression was prolonged by about 7 years by FDR’s statist policies. We indeed have nothing to fear but fear itself, but for the ends to which certain politicians will channel our fear.
Oct 26, 2008 - 6:00 pm 25. Fderfler:Wow — what a collection of excellent fellow travellers. AST- I hope you are wrong. Formwiz, I wish you well, but it will never happen. Hale Adams, thank you for Taylor, what a great insight unto something I often wondered about. John Blake, so depressing. Cfbleachers, I sent you a separate email.
Look guys, it is too late for logic and rhetoric! There is only faces in the polls. What have EACH ONE of you done to get someone in to vote who might not otherwise have voted?? Please get out from behind your computer and DRIVE SOMEONE TO VOTE! If BHO gets to appoint several Supreme Court justices we are going to be in deep trouble well beyond 2012 or 2016. It will be trouble for decades. The ONLY thing you can do now is to find a family member, friend, neighbor, or co-worker who might not vote and DRIVE THEM TO VOTE! Use your own car. Burn your own gas. Quite gassing on the Web and do something real and nearby! Please. It’s the only thing that will work now! As great a Pajamas Media is, you are preaching to the choir! Go out and find a non-voter and make them a voter!
Oct 26, 2008 - 7:07 pm 26. hitnrun:I feel only the slightest vindication after enduring two or three months of abuse from Europeans assuring me that America was to wallow in poverty and irrelevance because of our avarice and insisting that only an ignorant American could think that the crisis would chiefly hurt the industrial economies that sell stuff to us.
Oct 26, 2008 - 7:48 pm 27. Roger Godby:Japan’s PM recently made remarks suggesting the yen’s appreciation is due to foreign belief in Japan’s economic health; however, some Japanese media responses have noted that people are simply terrified of everything else: the yen is the least terrible currency around. Against the dollar, the yen’s the strongest it’s been in over 13 years, which is probably going to hurt Japanese exports and, later, weaken the yen.
While the idea of buying tax-free muni bonds under Comrade Obama is appealing, how many municipalities are going to default? Many apparently have underfunded pensions that are going to start to be collected. And once the Treasury starts printing money to pay Federal debts, will the bonds’ interest rates keep pace with inflation? Only The Omnipotent One knows, and he’s not saying anything but Hope and Change.
A pre-housing-boom home (and thus one not shoddily built) can be cheap. If it’s big enough, you can take in boarders, if necessary.
Oct 26, 2008 - 7:53 pm 28. promachus:I ahve said this elsewhere and it bears repeating: When the Europeans crow that the financial superpower is dead, they actually mean, “Come, save my ass.”
The one huge silver lining of this crisis is to watch the Euro crowd eating their own words. That won’t stop them from trying to pull one on the good old USA but it’s good to watch nevertheless.
Oct 26, 2008 - 8:43 pm 29. Rich K:Until American capital resufaces in the world scene this will get worse. They all follow our lead and have no options in taking that lead from us as they simply have no foundation to do so.As america goes so goes the world. When we shut down in 1930 the world tumbled. As we slow down now the world stumbles. No other nation or group of nations can sustain this world economy and no amount of bluff can make that statement false. If the US shuts down again politicly and suffocates the flow of capital expect the worst. Vote wisely America,the world is depending on it.
Oct 26, 2008 - 10:37 pm 30. Freddie Funky:The major European powers will feel their share of lending pain,and no doubt their crisis’s will be worse than America’s. Why is no one looking at the root of the crisis: ( guarenteeing bad loans with public dollars ie Freddie Mac and Fannie Mae). This was certainly the root cause. Greed on Wall street was a given and based on the rules set up by Freddie and Fannie, the bankers were just playing the game.
Banks became loan originators, knowing they sell all the crappy loans off on the secondary market as long as they could meet Freddie Mac or Fannie Mae guidelines. The US government even made it so that ITN’s could be used instead of social security numbers on these loans, allowing lots of non US citizens to take advantage of the US taxpayer guarentee of Freddie and Fannie.
The US will spend another 700B plue another 150B plus who knows how much to pay off bad loans. BUT.. When will the US subsidized bad loans stop? How will those rules change. When will we go back to 20% capital reserve on loans. Just think about it. The capital reserve percentage ( 20%, or 10% or 5%) .. is basically the loan’s buffer against market price flucuations. So when you give out loans with no buffer because you think it is fair.. you are exposing whoever takes those loans to catastrophic failure if the prices don’t rise forever. The government guarentee of Freddie Mac and Fannie Mae distorted the market, allowing banks to make loans that they knew were shakey and pass the risk off to the taxpayer. The awful legislation that allowed Freddie Mac and Fannie Mae to distort the markets drove the US crisis.
Why throw more money at the problem? Just fix the damn laws and send those overseeing Freddie and Fannie to Jail.
Oct 27, 2008 - 7:29 am 31. Whitehall:What is not clear from Mr. Kimball’s piece is to what degree European lending has been for unproductive assets. A lot of borrowing in solid performers is a good thing but the article implies that too much has been lent on the other kind.
For example, what happened in Iceland? What has that economy been producing (or not?) I know they have had big press for their “green energy” policies and I guess they still fish.
Oct 27, 2008 - 12:21 pm 32. Ron Murphy:Maybe the conspiracy theory may not be as far
fetched as everyone claims. The people who
have seen this coming and tried to warn people about a total meltdown. The Georgia Guild Stones have things written in stone maybe their predictions are closer to reality than most people think.
I think that Representative Ron Paul told of the financial meltdown long before the experts that believed their own lies and profits and confided to the masses lies.
Cheers, rfm
Oct 27, 2008 - 3:50 pm 33. Brian H:FF;
Oct 27, 2008 - 4:41 pm 34. Jess:You might be interested to know that the UK ALONE has spent more to shore up banks than the US. The rest of the EU, even more than that. Their likely defaulters are whole countries: the “unsecured” 3rd world borrowers, plus flaky South American regimes.
Thanks to America’s economic situation all other facets are affected at a rate much much higher than ours. It’s going to take regulatory changes to fix this. The government’s spending more money isn’t stimulating the economy, it is simply redistributing money.
Oct 27, 2008 - 4:46 pm 35. Marc Malone:Jess - It’s really not all that difficult a problem. I don’t get why people don’t get it? Maybe because I never took economics, although I seem to have picked some up doing bookkeeping.
FNMA & FHLMC must be defined. Either they are governmental, or not. If not, what’s the point? If so, tight oversight!
Mark-to-market. Make it a 3-yr rolling average, rather than immediate.
FHA. Put the lending standards back into place. Fix them permanently by law.
CRA. End it. Make sure everyone knows that IT was the basis of the whole mess.
Financial Derivatives. One must not make derivatives of derivatives. No opacity. They are glorified IOU’s. IOU’s based on IOU’s.
Sarbanes-Oxley. Repeal it. Make it so we can again have IPO’s in THIS country.
Fed rules. No rates below inflation rate. It’s just asking for speculation with OPM.
Most importantly… NO BAILOUTS, PERIOD! Let the danged poorly-run companies fail, so they can be taken over by better-run companies. Prosecute those who falsified the books, and the Congresscritters who made it all possible!
After that, the market will sort itself out. Did I miss anything?
Oct 28, 2008 - 12:18 am 36. Brian Richard Allen:35. Marc Malone:
Hear! Hear! Well said. - B A
Oct 28, 2008 - 7:14 am 37. The Ratnest » Blog Archive » Now I’m Spooked:[...] economies are, and that maybe American markets aren’t quite as foolish as we’re led to believe: “Europe,” Evans-Pritchard observes, has already had its first foretaste of what this [...]
Oct 28, 2008 - 1:47 pm 38. pashley:Time to dig out the history books. Try Ferdinand Braudel. Capitalism and crisis goes hand-in-hand. During times of crisis, even decline, the center has the resources (skill, connections, heft, deep pockets) to retain its prosperity. The periphery gets hosed.
The center is still New York. The New York will still suffer disruption, losses, recover in some restructed form, and march on. Everywhere else will be gasping for breath.
Oct 28, 2008 - 5:49 pm 39. Andrew Ian Dodge:Well there is good news out of all of this. It has killed the possibility of the UK joining the Euro stone dead. No one in their right mind would advocate joining it now.
Oct 29, 2008 - 8:21 am 40. Europe & Russia on the brink (economy) - The WebZappr:[...] the dollar to rocket. Nowhere has this been more extreme than in the ex-Soviet bloc. Clip Source: pajamasmedia.com Europe on the brink? (And Russia close behind?) For the last few decades, the West has been [...]
Oct 29, 2008 - 8:25 am 41. Marc Malone:Brian Richard Allen - Thank you.
Oct 29, 2008 - 1:20 pm 42. So Cal Jim:30 years ago, when I was in college, socialist economic theory was all the rage. I was fed a healthy dose of socialist dogma by most of my professors (i.e. “benevolent” government control= good; personal freedom and responsibility = bad). Of course there were a few who bucked the trend but, unfortunately, there were only a few. In the years since I graduated, the situation in all of our education institutions has deteriorated to the point where, relatively speaking, conservative teachers and professors are an endangered species. There are perhaps even fewer conservative administrators. What is my point? Simply this; we are about to have a Marxist elected president of the United States of America because we’ve allowed three or four generations of our children to be steeped in socialism from the time they enter kindergarten to the time they leave school - whether it be after 12th grade or after graduate school. I know first hand from my own experiences and those of my children (thankfully, all out of school now) that conservative thought is discouraged, ridiculed and, whenever necessary, brutishly suppressed. Because of this we have tens of millions of voters who are simply incapable of rational thought. They operate in a world ruled by their emotions rather than by their mind. They fixate upon the notion that It’s not “fair” that some people are poor while others are rich without ever considering why that must be so in a free society. They are incapable of understanding that government enforced “equality” always and necessarily results in tyranny where “the masses” will be worse off than the poor in free societies. This is why so many simply ignore the historical record of socialism. The horrors brought by socialism just don’t appear on their radar screens. Socialism’s glaring failures, when acknowledged at all, are always blamed on “reactionary elements” or some similar bogey man.
With a Marxist president appointing hard left judges and a congress dominated by the socialist Democrat Party (John Kennedy himself could not rise in this Democrat Part), we are all facing very dark days ahead.
Oct 30, 2008 - 11:15 pm 43. Marc Malone:Whitehall @#31 - They were investing heavily in third-world countries, whose economies are also collapsing. They can’t pay. U.S. bad debt was primarily in our own mortgage industry, so we suffer less, and can fix our own problems.
Furthermore, the world’s economy was premised on American consumerism. When gas prices spiked, people began cutting back. China’s now massively overstocked on manufactured goods, for example. Everyone criticizes our using so much of the world’s resources, but suffer when we don’t.
Oct 31, 2008 - 2:19 am 44. Jonesy55:@39 I wouldn’t be too sure of that, we have seen in this crisis what has happened to several countries in Europe that didn’t have the Euro, Iceland, Hungary etc who have had runs on their currencies and have needed help to service external debt. If Ireland hadn’t had the Euro they could probably have been added to that list.
Of course the UK is a much bigger economy with more resources than any of these countries but we have been running a dangerously high trade deficit for a long time and a lack of confidence in our economy has caused a run on sterling already against Euro, Dollar and Yen. A long period of sterling weakness will probably reignite debate on the merits and demerits of joining the Euro.
Under normal circumstances, many would point to a lower pound as being beneficial to exports which would help redress economic imbalances but with demand tanking in all our major export markets this is a non-starter in the short term.
Eurozone countries that found themselves with too much boom and too much debt such as Ireland, Spain, Greece will need to learn in future that if EZ interest rates are too low for their needs, they should use fiscal measures to stop the boom getting out of control and turning into a bust rather than just riding the wave and enjoying short term inflationary growth.
Of course if the UK joined the Euro, it would make the eurozone economy bigger than the US economy which would probably hasten the USD’s demise as dominant reserve currency which would have significant impact on the global economic picture. USD wouldn’t go away as a reserve currency but it would find itself joined by the Euro to a greater extent than currently and maybe eventually the Yuan after China introduces full convertibility.
Oct 31, 2008 - 4:17 am 45. deguello:We are seeing another “ism” (globalism) collapse.Fecklessness ,greed,and speculation, have destroyed the international economy. A depression is nigh.Nothing except a huge social upheaval will change this. The solutions are not economic but political;the whole economic order of racket capitalism and globalization,needs to be destroyed.
Oct 31, 2008 - 7:53 am