The all time lowest interest rate
The Bank of England (BoE) has announced it will cut the lending rate with another 5 points to 0,05 percent. This is the lowest interest rate since the BoE's founding in 1694 by William III of Orange.
Last resort of the "lender of last resort"
This is the UK's last resort. If it does not work, there is nothing to stop the descent into a deep recession, with the attending DOUBLE DIGIT unemployment.
Lessons are not being learned
Quantum Fund co-founder Jim Rogers criticized the U.S. governments policy of bailing out of failing financial and other firms. The bail-outs are impairing the learning ability of the economic leadership and are morally wrong. Those institutions who took the biggest risks are bailed out at the taxpayers expense. Smarter, more prudent leaders are not reaping the benefits of being able to pick up the assets of the failing companies when they go broke.
Those who created the mess are sitting high and dry
Leaders of U.S. Industry who took criminal risks are now walking around with hundreds of millions of Dollars in their pockets, while the U.S. middle class is going to be squezed once taxes are raised to pay off the huge Debts the U.S. Government is incurring in order to spend its way out of the Debt crisis. Basically the U.S. is taking more of the poison that got it into this terrible spot in the first place.
"They all took huge, huge profits. Who was the head of Citigroup? Chuck Prince? I mean, how many hundreds of millions of dollars did Prince take out of the company? How many hundreds of millions of dollars did other Citibank execs take out of the company? Wall Street has paid something like $40 billion or $50 billion in bonuses in the past decade. Who was that guy who was the head of Merrill Lynch (MERR)?
Right, Stan O'Neal. He got $150 million for leaving, even though he ruined the company. Look at the guy at Fannie Mae (FNM), Franklin Raines. He did worse accounting than Enron. Fannie Mae and Freddie Mac (FRE) alone did nothing but pure fraudulent accounting year after year, and yet that guy's walking around with millions of dollars. What the hell kind of system is this?"
Global Social Unrest
Jim Rogers sees this Debt crisis as a global problem and forecasts global social unrest.
In my opinion this crisis will hit the nations with more ethnically and culturally diverse societies harder than more homogenous society. This crisis will do for the West what the Brezhnev years of stagnation did for the Soviet Union and Communism.
Showing posts with label World politics. Show all posts
Showing posts with label World politics. Show all posts
Friday, March 06, 2009
Friday, August 17, 2007
US power is faltering
In the 1920ies and 1930ies world power moved from Europe (Great Britain) West accross the Atlantic. It was not until the 1950ies that everybody understood that European power had collapsed and that the USA was racing ahead. The 1956 Suez crisis caused the world to realise what the new power realities were. Exit Europe. All eyes on the USA and the new contender, Soviet Russia and world communism.
Right now we can see a similar power shift. In the stage of the 1920ies and 1930ies shift of power, when the UK needed US capital to develop the economies of its empire in the Middle East and Asia. The new global financial power is China. And it has started to openly flex its muscle: "Two Chinese officials at leading Communist Party bodies have given interviews in recent days warning, for the first time, that Beijing may use its $1,330bn (£658bn) of foreign reserves as a political weapon to counter pressure from the US Congress. Shifts in Chinese policy are often announced through key think tanks and academies."
And a key US Policy maker is taking heed (HT Parapundit). David Walker, comptroller general of the US recently warned:
"The US government is on a ‘burning platform’ of unsustainable policies and practices with fiscal deficits, chronic healthcare underfunding, immigration and overseas military commitments threatening a crisis if action is not taken soon"
The fiscal imbalance meant the US was “on a path toward an explosion of debt”.
The recent waves made by the US sub-prime mortgage crisis only underscore the words of the US comptroller general. European and Asian banks are underwriting US consumption. The US saving rate is close to zero. The US does not have the capital to develop its own infrastructures, let alone the infrastructures of societies in the Middle East. Moreover unfettered Third World immigration is straining US education, transport, health and many other infrastructures. Its economy is strongly consumption driven and this consumption is fuelled by credit. Meanwhile China is sitting on a mountainous treasure, much like Fafnir, Sigurd's Dragon.
The US government and the Federal Reserve must make economies. But these cutbacks will cause a recession and unemployment. Together with a disastrious foreign war this will make US internal politics unstable and depressed in the next decade. Think of the post-Vietnam era, but then much worse.
After 1990, the US was the only power and we lived in uni-polar world. We are moving back into a bi-polar world and I would expect local powers to become restless as well. Similar to what happened in the 1920ies when Japan and Germany tried to fill the British power vacuum with military adventurism and warrior ideologies.
Countries that could play such a role are Iran, Turkey and Egypt, for the Middle East. Iran has already allied itself in the SCO with Russia and China for such a role.
Right now we can see a similar power shift. In the stage of the 1920ies and 1930ies shift of power, when the UK needed US capital to develop the economies of its empire in the Middle East and Asia. The new global financial power is China. And it has started to openly flex its muscle: "Two Chinese officials at leading Communist Party bodies have given interviews in recent days warning, for the first time, that Beijing may use its $1,330bn (£658bn) of foreign reserves as a political weapon to counter pressure from the US Congress. Shifts in Chinese policy are often announced through key think tanks and academies."
And a key US Policy maker is taking heed (HT Parapundit). David Walker, comptroller general of the US recently warned:
"The US government is on a ‘burning platform’ of unsustainable policies and practices with fiscal deficits, chronic healthcare underfunding, immigration and overseas military commitments threatening a crisis if action is not taken soon"
The fiscal imbalance meant the US was “on a path toward an explosion of debt”.
The recent waves made by the US sub-prime mortgage crisis only underscore the words of the US comptroller general. European and Asian banks are underwriting US consumption. The US saving rate is close to zero. The US does not have the capital to develop its own infrastructures, let alone the infrastructures of societies in the Middle East. Moreover unfettered Third World immigration is straining US education, transport, health and many other infrastructures. Its economy is strongly consumption driven and this consumption is fuelled by credit. Meanwhile China is sitting on a mountainous treasure, much like Fafnir, Sigurd's Dragon.
The US government and the Federal Reserve must make economies. But these cutbacks will cause a recession and unemployment. Together with a disastrious foreign war this will make US internal politics unstable and depressed in the next decade. Think of the post-Vietnam era, but then much worse.
After 1990, the US was the only power and we lived in uni-polar world. We are moving back into a bi-polar world and I would expect local powers to become restless as well. Similar to what happened in the 1920ies when Japan and Germany tried to fill the British power vacuum with military adventurism and warrior ideologies.
Countries that could play such a role are Iran, Turkey and Egypt, for the Middle East. Iran has already allied itself in the SCO with Russia and China for such a role.
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