Posted on 09/21/2008 7:21:53 PM PDT by DeaconBenjamin
An almighty crash has been averted, very narrowly. There is no guarantee that the revolutionary actions of the US government will prevent a full-fledged global slump, but at least we now have a fighting chance.
By taking the colossal wreckage of the credit bubble onto its own books in a $700bn (£382bn) taxpayer sink, Washington has forestalled a run on the world banking system, and may hopefully have saved the viable core of modern capitalism.
* * *
We will find out soon enough whether the rest of the world can respond with such dispatch as the hurricane smashes into them. As of today, the core risk is no longer in the US. It has rotated to the weaker and more brittle polities of Europe, Latin America, and Asia - especially China.
Europe has embedded paralysis in its treaty law. Maastricht prohibits a Keynesian blitz. Budget deficits above 3pc of GDP are not allowed until an EU country is already in dire straits, and even then approval requires a committee vote by 27 states. So Ireland, Italy and France must now tighten fiscal policy into the downturn. There is no EU Treasury to back the euro, and therefore no Euro-Paulson with the powers and legitimacy to take sweeping steps in an emergency. By extension, there is no clear-cut lender of last resort either. Each country is on its own, yet none have the instruments of monetary policy to carry out a Paulson-type rescue with credible punch.
(Excerpt) Read more at telegraph.co.uk ...
Gotta love the headline.
It is time though, to stick it to the socialists Dems who brought us to this.
I think (from the body of the article) that he is referring to the rigidity of the ECB, not free market vs. socialist economies...
And he’s right about the ECB. They’re very much in the mold of German banking - by design. The compact of the EU is that the French inform the political aims of the EU, and the Germans inform the financial side of things.
btt
This puts things in perspective.
All we ever hear is is that our debt is the highest ever in the history of the world.
Not true.
Those chickens are coming home to roost...
Us taxpayers funding worldwide banking bailout...and they call me a nut for hating Globalism...
Japan tried to spend its way out of deflation. It didn’t work but they ended up with a big debt.
USA debt may be 48% of GDP today. Watch that ratio change as the trillions mount from bailouts and as GDP decreases. We are in for a doosey of a recession and GDP is not going to hold at current levels.
1. Accordin gto Maastricht european countries are allowed to have a higher deficit that 3% of the GDP if there is a crises
2. Many european countries had a higher deficit during the last years even without a crises.
3. The ECB did similar things as the FEd to stabilize the markets but thanks god the ECB had a different policy during the last decade and thanks god continental europe has a different financial regulation and law system because now we do not have the problems the US has.
You had the big big party during th elast decade with easy money huge growth and all for free financed by deficit and debt. Now it is time for the hangover and hopefully time for solid fiscal conservatism and a completely different financial system with a completely different FED policy.
The FED was part of the problem and not part of the solution. I can not say such things about the ECB although i do not totally agree with the ECB policy.
...Each country is on its own, yet none have the instruments of monetary policy to carry out a Paulson-type rescue with credible punch...
Shock! You mean, as in, actual capitalism??? There are no $700bn (WTF!) bailouts that will take Wall Street into national hands and end real capitalism in the USA.
The US solution to this obvious downward curve of a cyclical system is to break the model and turn into Venezuela???? How can the Fed run to Congress and ask for $700bn of US taxpayer money because THEY don’t like the system THEY chose for the economy.
Its bloody CAPITALISM. Live with the boons and the tragedies. You want to hinder growth in exchange for security? Then enter socialist market economics.
...You had the big big party during th elast decade with easy money huge growth and all for free financed by deficit and debt...
I agree. The problem here is that because of incompetent management and running the US economy is going to nationalise to maintain itself. But the after shocks are felt around the world. UK banks bought tons of ‘bad debt’ from the US (because we were told to) and are suffering because of that. Two large mortgage lenders are having to merge, in a deal that would at any other time to considered an attempt to monopolise the market. A smaller bank in the UK (Northern Rock) had to be nationalised in the UK to prevent its collapse (bad move, not the way to run an economy, even if the news is bad).
How can any European bank compete with an economy in the US that is going to be bankrolled by the government? That is not a private company/enterprise, its nationalisation.
The problem is less regulations in th epast shows the result of nationalization and huge costs for the taxpayer and normal people today.
The UK and the US worked very hard against every regulation of these parts of the financial system we now talk about. The reasons were clear because these companies are based in the UK and US.
Additional to that we saw a debt driven economic boom with the housing amrket as the indicator for that. The UK suffers more or less the same housing market crises as the US does.
Overall the european banks will be the winner of that situation at the end of the day. Simply because their losses will be much smaller compared to the US. With european banks i mean continental europe. The uK is a different case because the reasons posted above and the overall greater connection to the US financial system. I have no idea how big the present problems of the financial system within the UK really is. Nothern Rock was quite lucky in my opinion because they became bankrupted very early and taxpayers money was easier to get.
Look i am german. For me the solution is very easy. We do not have these problems and there is no way that we will get these problems in the future because we have different laws and a and a complete different system. I am a great fan of the free market system but this is the best example why deregulation is not always the best solution. Perhaps for the bankers that got their bonus payments during the last years.
A system (US) where the financial sector represents 3% of the GDP but 45% of the company profits tells the whole story about the risks. everybody was aware of that and no politicians should telling me that they couldn´t see this coming.
The normal people pay the price for this.
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