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Archive for the ‘capitalism’ Category

World banks brace for euro collapse | GoldSilver.com

goldsilver.com12/26/11

Banks around the world are preparing for the possible collapse of the euro as fears of the European debt crisis increase.

What Will Happen if the Euro Collapses? A Few Scenarios | Global …

globalspin.blogs.time.com12/13/11

Despite the distracting political drama over the UK's outlier rejection at last week's European Union agreement on fiscal and budgetary coordination, it's now become clear that main objective of the collective effort–to ensure …

If you think that the European financial crisis resembles the American banking crisis of a couple of years ago then you’re underestimating the gravity of Europe’s problem.

The European sub-prime crisis of 2007 and 2008 was ‘solved’, although most likely only temporarily, by nationalizing bank debt, and whilst that calmed the markets, the bottom line is that bank debt was merely being transferred onto the public-sector balance sheets.

The governor of the Bank of England, Mervyn King perhaps summed it up best when he said:

“Dealing with a banking crisis was difficult enough, but at least there were public-sector balance sheets onto which the problems could be moved. Once you move into sovereign debt, there is no answer; there’s no backstop”.

The investors who leapt back into the US markets in 2009 and fueled the biggest stock-market leap since the recovery from the Wall Street Crash in the early 1930s, are now quickly disappearing and the confusion on European bourses is even worse, and we are now in a similar position to that of 2008.

The crunch that is now happening in Europe was foreseen by a great many economists for many years however, because of the difference in approach by Germany and Holland who practice high saving and low spending, and the Mediterranean countries and southern Ireland who have exactly the opposite approach.

The Mediterranean countries and the U.K. too, borrowed cheap in order to raise their standards of living, ignoring the question of whether they could afford to take on so much debt, and that was one of the main causes of the sub-prime disaster.

The Big Danger

Whereas it was possible to bail out sub-prime households, and the banks that lent to them, the International Monetary Fund doesn’t have enough cash to bail out major economies like Spain, Italy or Britain.

The sub-prime property market in the US, together with its slightly less toxic relatives represented a $2 trillion mound of debt, but the combined public and private debt of the most troubled European countries which include Greece, Portugal and Spain is closer to $9 trillion.

If Greek and other government bonds collapse, then that country’s banking system would de facto become insolvent overnight and banks throughout the euro area would be at risk because they hold so much of their neighbors’ government debt.

The Prognosis

It took Britain just a few days in September 2008 for the Government to push through the semi-nationalization of Royal Bank of Scotland and HBOS, but as politicians are now discovering, organizing a European sovereign bail-out is far, far more difficult than rescuing a bank, or banks.

The euro continues to fall and European politicians who are torn between Brussels and their electorates are emitting confusing signals which only tend to destabilize the markets even further.

The single currency might possibly survive, but only if its members were to agree to an even closer political union, and the likelihood of that happening seems as likely as the survival of the Euro.

Is William Blum Right About Obama? « NO Hegemony!

nohegemony.wordpress.com11/2/11

When Barack Obama was elected, I was tepidly curious about what Blum would write about my new president. Like most African Americans, I was profoundly goo goo over the reality of having someone with African blood in his …

Author comment- America's return to Asia: Old hegemony or new

www.asiaalone.com11/29/11

The Obama administration has energetically re-engaged Asia when, facing many domestic challenges, a post-crisis America might easily have turned inwards. An engaged America is better than an isolated one. But Asians …

Following WW2 the United States found itself in a position of global dominance and that dominance has lasted for more than sixty years, during which time America remained a hegemony.

 

But What Is A Hegemony Responsible For?

Militarily, a hegemony is responsible for stabilizing key regions and guarding the global arenas.

Economically, it must offer public goods by opening its domestic market to other states, supplying liquidity to the world economy, and provide the reserve currency.

A hegemony is supposed to solve international crises, not cause them. It is supposed to be the lender of last resort, not the biggest borrower.

Does the U.S. Still Meet The Above Criteria?

Sadly or not, the answer is most likely, "No".

America no longer seems able to win wars, and not only is its economy in the pits but it’s now predicted that the interest on its debts will equal its total income by 20120 meaning it will effectively be bankrupt.

So What Happened?

Many would claim that much of America’s decline can be attributed to its own self-defeating policies and although that’s true in part it’s also because other countries such as China, India, and Russia are in the ascent.

When Will China’s Economy Overtake America’s?

China’s economy is growing much more rapidly than the United States’ and leading economic forecasters predict that it will overtake the U.S. as the world’s largest economy, measured by overall GDP, sometime around 2020.

In 2008, China already passed the U.S. as the world’s leading manufacturing nation, and that’s a title the United States had enjoyed for over a century, and this year China will displace Japan as the world’s second-largest economy.

Weaknesses in the fundamentals of the American economy have been accumulating for more than three decades and the collapse of its economic system leading in turn to the loss of its global preeminence were forecast in the 1980s by many people including, David Calleo, Paul Kennedy, Robert Gilpin, Samuel Huntington, and James Chace.

So What’s To Be Done?

America’s leaders need to adjust to the new world order, but there is so far little sign that they are about to do so.

The foreign policies of individual countries are shaped by the ideas that their leaders hold about them, and perhaps more than most, America’s foreign policy is the product of such ideas.

Why Is It So Hard For U.S. Leaders To Adapt To Reality?

America’s leaders still believe in exceptionalism (being different from the norm) and that belief dates back to the Puritans.

The U.S. is different, better, and morally superior to the rest of the world.

An Example Of U.S. Thinking

Around forty five years ago, Edmund Stillman and William Pfaff wrote that;

"The United States is a model for the world and America’s wants and values are universal".

Which is something that George W. Bush harped on repeatedly.

Good Versus Evil

The above assumptions invest American foreign policy with a tendency to see the world in terms of good versus evil.

And because the U.S. looks through this prism, it believes it has the obligation to prevail in this global struggle, and such thinking is delusional.

The End Game

When you are big, strong, and powerful, you can afford to make the same dumb mistakes over and over again, but when your power declines, you will begin to pay a price for repeating your mistakes.