Projection Goldman Sachs, in der Spiegel

World Development from 1820 to 2050
(Demography, GDP, GDP per capita)

This last figure is a very « politically correct » projection for 2050 by Goldman Sachs which does not take into account the current peak oil factor, and thus the end of the petrodollar and of fiat money - this, subsequently will all have ended by 2030 at the latest, i.e. together with the end of the oil era. The disclosure of American hedge funds practices which had been destroying economies and jobs in the US and around the world, now the total meltdown of the financial subprime banditism system resulting in chain bankruptcies of major financial institutions of the US, all these events will certainly lead to the rapid decoupling of other economies from that of the USA. And eventually, future taking-over of US assets by foreign wealth funds will provoke the faster decline of the United States as an overall influential and leading economic and military power. Some might be tempted to say, not without a sigh of relief, « as a super terrorist state and a permanent threat to world peace ».
Johannjs, September 2008
 

 
September 30, 2008 at 22:43:54

The Beginning of the End

 
If one were to believe the Bush Administration's theory on 911- that 19 Arab terrorists hijacked airliners with box cutters, flew them into the buildings that symbolized the financial center of the world, and attacked the bastion of freedom and democracy simply because they hate our freedoms and way of life, one would be compelled to believe that the terrorist's strategy - bringing down the financial might of the United States in one fell swoop - succeeded brilliantly.  

Could the terrorists have planned all of this in a spectacular strategy to engage the United States in a protracted war in both Afghanistan and Iraq?  Then eventually bleed the USA dry of dollars, sending most of those greenbacks to the Middle East in the largest transfer of wealth in United States history, and propel the USA into a financial crisis reminiscent of the great depression of 1929?  Again, we find Bush employing fear tactics to warn US citizens of an imminent collapse of the financial system if Wall Street does not get a government bailout.  Another huge transfer of wealth ($700 billion) from ordinary US taxpayers to the Wall Street fat-cats and the well connected will take place.   
 
On the other hand, did Bush and his administration of upper-crust C- students from Yale just screw things up so badly that the next president will inherit a financial mess that is beyond repair?   
 
The reason Bush invaded Afghanistan, and then Iraq, in simplest terms, is crude oil.  In other words, this is Bush's national energy policy - to invade and occupy two sovereign oil rich nations to consume their crude oil reserves and their economies, and absorb them into the US economy in terms of keeping the US dollar afloat as the world's reserve currency.  By attacking and invading these sovereign countries, Bush was also sending a signal, to those who know of such things, that the US economy is in serious trouble.  
 
Bush used military force to insure that rogue nations like Iraq, and Iran, should not use other currencies, like the Euro, in their basket of currencies accepted for the payment of crude oil.  Bush put the United States on a war footing and reserved federal dollars for the invasion and occupation of Iraq, and diverted federal money away from all 50 states for the so-called 'war effort'.  Bob Baer, a former CIA operative, told Chris Matthews on MSNBC that the wars in Afghanistan and Iraq cost the US Military $5 billion per day.  Doing some quick math equates to a total yearly cost of $1.83 trillion, or over $9 trillion for 5 years of war in the Middle East.
 
Congress recently raised the debt limit to 9 trillion dollars.  
 
Is this Middle Eastern colonialism so important that it requires the United States to deplete its currency reserves?
 
Nevertheless, Bush, being an upper-crust C-student from Yale, apparently has no conception of even one simple economic theory, such as the elementary theory of supply and demand.  If he did have an inkling of any comprehension of economics, it did not matter anyway, as his cowboy style of diplomacy ruled the day.  Since the United States has lost a SIGNIFICANT portion of its manufacturing base, and most of its citizens are sending their wealth overseas to oil-rich Arab nations, the US did not earn enough to cover any portion of its import bill for oil and Chinese clothing.  Instead, the US became entirely dependent on China to finance its massive deficits, thereby indicting Asian countries in financing the invasion and occupation of Afghanistan and Iraq by proxy.  Of course, China has an economic interest in appeasing the United States since the US is China's huge export market.
 
Nevertheless, one must look at the Chinese economy in more detail.  Since the state owns and regulates the banking system, and has its fingers in the means of production, in terms of regulating its huge population to be the most productive as possible, China is setting the paradigm for other countries to follow in a truly global economic world.  While Bush was busy scheming pretexts to invade and occupy oil rich Middle Eastern countries, China was refining its economic strategy to dominate the global economy.  China even tied its currency to the US dollar, so the US could not profit from favorable gains based on the repayment of interest on China's investment in US treasuries. The United States, under Bush, is now looking more and more like a socialist country [!], of course, if you are rich. In response to the financial collapse of venerable Wall Street institutions, Bush has begun the nationalization of private companies, such as AIG.  

This is unheard of in modern times, and governments in Europe, for example, are beside themselves watching the once great nation of the United States privatizing profits, and socializing losses on Wall Street were the well-connected and super-rich are getting, for lack of a better term, government welfare.  The Middle Class must suffer the indignities from the very leaders they elected into power, and, most amazingly, they are about to elect an individual whom will continue the same course in the near future.  Note to European countries - prepare for a windfall of super-rich American immigrants seeking asylum into your countries.  Please do not let them in or they will destroy your economy too.
 
It is my guess that the United States, under the leadership of George W. Bush, and the conservative Republicans, have began a series of unfortunate events that will transfer not only billions of dollars to the Middle East and Asian countries (China), but will also, by default, transfer the world's financial center from New York to Europe (Germany).  This is the beginning of the end for the United States, and let the world know that George W. Bush and his policies provoked this financial crisis and directly resulted in the ruination of the US economy.  Will Rogers once said that the United States is the only country in the world where one can drive to the poor house in an automobile. 
 
Note to Will Rogers - if you have the gas! We are all out in Georgia!
 
I hold several degress from the Pennsylvania State University and I love to research what most people call conspiracies. For example, the JFK assassination and 9-11, and vCJD (Mad Cow disease), to name a few. I have come to realize that we in America do not live in a democracy, but a rule by a small corrupt majority which happens to be filthy rich - the same people who brought us the genocide of the Native Americans, slavery, and endless perpetual wars as part of a national energy strategy for the United States by the collusion of energy corporations and the US Military. My primary goal is to help expose these people who start all of the wars, become bloated with wealth, from the backs of the destitute poor soldiers, and try to make the world a better place for humanity by helping cure the sick, discovering new forms of energy, and to make warfare illegal on planet Earth. The human species has now evolved enough to know better, and we need leaders to show us the way, as we can have heaven here on Earth, not some form of a deranged idea of heaven in some parts of outer space, which extremists of all forms are dying to get into.
 

A whole new world

Is global economic power shifting East, spelling the end of the Western model?

Felicity Duncan
23 September 2008 12:16
 
Confidence in American economic management has slumped in the wake of the subprime crisis and the collapse of Wall Street (see "Wall Street" no longer exists). According to some Moneyweb market commentators, this may spell the end of the economic dominance of the United States, and its status as the world's premier investment destination.
 
For decades, the US Treasury Bill was the last word in safe haven assets. It was seen as virtually risk free, and was implicitly backed by the strength and resilience of the US economy. At the end of 2006, foreigners held 44% of publicly held T-Bills; between them, Japan and China hold more than $1 trillion-worth of US debt instruments.
 
But times, they are a-changing.
 
The financial instability the last few weeks have revealed have sent shockwaves through global markets, and eroded investors' faith in the US system.
 
"Foreigners are going to start realising that running to the comfort of Uncle Sam in times of trouble isn't necessarily the right thing to be doing - not least when the core problems that we are all facing actually come from Uncle Sam's camp anyway," said Investec Asset Management's Michael Power.
 
"I think [the use of T-bills as a safe-haven asset is] something we are going to have to re-examine, and it's going to be difficult in the short term, because there's no obvious successor to the T-bill as a place of refuge. But I do think that, looking ahead, we are going to have to come up with something else."
 
"Interestingly the Chinese are already starting to talk about the idea of replacing the US dollar and the US Treasury bill with a basket of currencies. They weren't specific in the China Daily, but there's an indication already that people are starting to think in other directions."
 
For Power, the recent series of disasters on Wall Street, and the decision by the US government to spend over $1 trillion on remedying them, is a worrying sign.
 
"I don't think the clean-up operation is going to be as simple as just saying, 'OK, we are willing to go $700bn' (see Struggle looms over bailout plan details). The mechanics of that whole process are going to be very complicated."
 
"On top of that I don't think that many people have focused on what all this ultimately is going to cost in terms of the credit standing of the United States itself. Over the last couple of weeks they have added potentially $1,2 to $1,5 trillion dollars worth of debt to the national balance sheet, and I don't think that they can do that without the yields on treasury bills starting to suffer, and the value of the dollar, which we have already started to see turn around this week. I think the rest of the world is going to be a lot more circumspect when looking at the United States from now on."
 
Macquarie First South's chief investment officer Imtiaz Ahmed agreed that the US is showing major signs of financial instability.
 
"I've been a strong supporter of the US dollar for a long, long time, but these latest developments in the last two weeks have certainly scared me. Just say to yourself, a large part of the US is service-orientated; a large part of that service denomination is banking and financial services-driven. And what we've seen there, the weaknesses in their financial system, must be a cause for concern. More importantly, we all talked about the budget and trade deficits in the States for a long time, and a further $700bn bail-out by the US Federal Reserve is just going to drive the budget deficit even wider."
 
Ahmed pointed out that investors already seem to be seeking out alternative safe havens.
 
"I think right now there is a real worry and risk of currency debasement, what I mean by that is that most currencies right now are at risk. You just don't know which is most at risk, whether it's going to be the US dollar, the Swiss franc - you might have already heard rumblings about UBS being in trouble as well - and whether it's going to be Europe or the UK. You know that those economies are slowing very quickly."
 
"So investors right now are not spoilt for choice and in this environment gold does best. And that's what we've seen in the last few days. And even today we saw a sharp rally in the gold price. The gold price for me has always been an excellent barometer of risk measure, and that gold price right now is telling you that there is more trouble coming."
 
With more trouble perhaps brewing on the horizons, and global investors already nervous, it looks like tough times ahead for the world's economic powerhouse, the USA.
 
U.S. Secretary of the Treasury Henry Paulson (left) and FHFA Director Jim Lockhart announce the government's takeover of Fannie Mae and Freddie Mac.
(Reuters/Joshua Roberts)

What the Fannie and Freddie Nationalization Means

September 10, 2008 | From theTrumpet.com

The Fannie and Freddie takeover shows the banking crisis is getting worse. What are the implications? By Robert Morley

On Friday, the federal government announced it was nationalizing the two giant mortgage lenders Fannie Mae and Freddie Mac. Predictably, the markets responded as if it was the end of the credit crisis. Hardly anything could be further from the truth. We are just getting started.
 
The economy is in such a precarious position that even though the bailout will be disastrous for taxpayers and the economy from a longer-term perspective, the immediate consequences of letting the lenders fail would most likely have been even worse. If Fannie and Freddie had collapsed, America probably would have had economic Armageddon on Monday.
 
As Gerald P. O'Driscoll Jr. wrote in the New York Post, "At the moment, they're too big to fail but also too costly to keep."
 
America's economy has similarities to a drug addict. It desperately needs cheap money. If you take the easy money away (let Fannie and Freddie fail) the economy goes into cardiac arrest (or that is the fear). But give the lenders another shot of money (from the U.S. Treasury), and maybe the economy will keep functioning for a while longer. Inject enough money and you can even induce a temporary high. The problem is, you constantly need ever increasing amounts of dollars to remain in the "feel good" zone. And all the while, other side effects, such as a devaluing dollar, rising inflation, and deteriorating credit worthiness, drain the future economic life of the nation.
 
Fannie and Freddie were huge sources of money for the economy. They provided inexpensive loans and provided financing to many people who would normally have been considered too risky for traditional lenders. This increase in demand for homes-and the resulting increase in home prices across America-helped create the biggest housing bubble in history. Hundreds of thousands of jobs were created during the housing boom, and homeowners were able to use their homes as a cash machine by borrowing money against their rising value.
 
Now, because of the current banking crisis-which is the result of risky lending, skyrocketing foreclosures, and plummeting home prices-the major lenders have curtailed lending, or have gone bankrupt. Consequently, Fannie and Freddie now fund around 75 percent of all mortgages issued in the country. If Fannie and Freddie had failed, the complete mortgage market would have gone into meltdown.
 
Unfortunately, the Fannie and Freddie takeover will do little to fix the system. Nothing fundamental has changed. Housing prices keep falling, unemployment has now increased to a five-year high, and foreclosures continue to escalate. As long as the housing market deteriorates, bank balance sheets will pay the price for years of risky lending practices. Government officials have opted for what they considered the lesser of two evils and traded hundreds of billions in bad Fannie and Freddie loans for a functioning lending market.
 
The seizure also illustrates just how dependent America is on foreign lenders.
 
These foreign investors (primarily the Chinese, Japanese and Middle Eastern oil exporters) are the same ones that provide the hundreds of billions of dollars the federal government needs to borrow each year to function. The federal government had to keep its foreign creditors happy, and as the Wall Street Journal points out, the Treasury Department was receiving a flurry of calls from angry and worried Asian investors just prior to its decision to nationalize the two lenders. America cannot afford to have China and Japan angry.
 
For example: Last August, two Chinese government officials highlighted how China could use its massive U.S. dollar holdings (which include hundreds of billions in government treasuries) as a political weapon to influence the United States. One Chinese cabinet-rank minister went as far as saying that America's debt should be used as a "bargaining chip" to influence trade talks. Another Chinese official warned that China could set off a dollar crash if it so desired. Chinese state media referred to the country's stockpile of U.S. dollars as its economic "nuclear option," capable of destroying the dollar at will.
 
This angle of the risk of foreign capital flight has not been well covered in the media. And part of the reason may be that the dollar has rallied lately-rising approximately 10 percent since mid-July as measured against the U.S. Dollar Index (a basket of currencies). However, the rise of the dollar is not the reflection of newfound strength in the U.S. economy; it more reflects the breakdown of confidence in other economies and their currencies, such as the pound, the euro and others. The dollar is still down about 40 percent from 2002.
 
The most likely result of the Fannie and Freddie seizure will be temporary stability. Mortgage rates fell following the announcement, so credit markets may temporarily loosen up.
 
But longer term, economic prospects have not changed. Five trillion dollars' worth of suspect mortgages are now on the federal government's books. This means that U.S. government debt will become suspect, and there is an increased chance that U.S. bonds will be downgraded in the future to reflect the increased likelihood of a reduced credit rating. The takeover will also place more pressure on the dollar, at least over the longer term.
 
 

Paulson's Bailout Money = Asia's Extortion Money

September 30, 2008 | From theTrumpet.com

$700 billion is a lot of money. Where is it all going to come from, and what will be the price? By Robert Morley

Big numbers get thrown around like they are nothing these days-a $140 billion tax refund here, an $85 billion bailout there. America must be one rich country. But America is not rich. It's broke!
U.S. Treasury Secretary Henry Paulson's $700 billion bailout plan may have been killed by the House of Representatives, but you can be sure that some form of similarly-sized gigantic rescue will most likely make it through eventually. The U.S. government, however, was already expecting to borrow over $430 billion to cover its normal operating expenditures. Judging by the size of the problem, America could easily be looking at a budget deficit of well over $1 trillion if it tries to prop up the banking sector. As a percent of gross domestic product, America hasn't spent that much money since World War II.
 
Such an outlay would put the United States well within banana republic territory. And as America's leaders and banking experts claim, the other alternative-doing nothing-would be the financial equivalent of bombing us back to the Stone Age.
 
So which foreign investors are going to loan the U.S. government hundreds of billions so it can purchase above-market-price mortgages and other noxious "investments" to bail out big banks? Who would be willing to brave the growing U.S. credit risk?
 
The American monetary black hole might be about to realize that its orbiting countries are no longer enthusiastic about lending it money.
 
Already there are inklings of discontent from America's largest supporters. According to Bloomberg, foreign creditors may be past their limit on how much U.S. government debt they want to be exposed to. In fact, there are rumblings of possible central bank treasury sales, as no nation wants to be the one left holding the bag if America's economy plunges and investments in its bonds and dollars become worthless.
 
International holders of U.S. treasuries must quickly reach an agreement to prevent panic sales leading to a global financial collapse, said Yu Yongding, a former Chinese central bank adviser. "We are in the same boat; we must cooperate. If there's no selling in a panicked way, then China willingly can continue to provide our financial support by continuing to hold U.S. assets."
 
"China is very worried about the safety of its assets," says Yu. "If you want China to keep calm, you must ensure China that its assets are safe." According to Yu, high-level U.S.-Chinese communication every "couple of days" is keeping Chinese leaders informed and helping to avoid a potential panic.
 
But here is the most interesting statement of all from Yu: After noting that China is helping the U.S. "in a very big way," he said that China should get something additional in return for taking so much extra risk!
 
If China is thinking that way, you can almost guarantee that America's other creditors are thinking along the same lines.
 
So what is America giving in exchange for the hundreds of billions in international loans? Concessions on Taiwan? Oil and other natural resources? Freedom to purchase strategic U.S. corporations? Access to U.S. military equipment and technology purchases? Political and national compromises?
 
The consequences of America's indebtedness are about to give a new perspective to the biblical proverb, "The borrower is servant to the lender."
 
As both the Wall Street Journal and the Washington Times point out, one of the primary reasons the government stepped in and nationalized Fannie Mae and Freddie Mac was to protect the foreign bond holders-the same bond holders who lend the hundreds of billions of dollars the government needs each year to keep functioning.
 
America has become a servant to foreign creditors. And servants don't tell others what to do. They get told what to do.
 
 
Stephen Flurry | Columnist

9/15 and the Next Superpower

September 26, 2008 | From theTrumpet.com

America's financial meltdown has awakened a beast in Europe.

How SIGNIFICANT that the United States has inflicted itself with a financial wound so grotesque and debilitating that it will NEVER fully recover. "This is embarrassing for the United States of America," Treasury Secretary Henry Paulson said on Tuesday.
 
It's so much more than an embarrassment. It's a trumpet-blast SIGNAL-to the U.S. and the rest of the world-that America's reign as the global economic superpower is now over.
 
"The world will never be the same again," Berlin's finance minister told the German parliament yesterday. Given the financial muscle now being flexed in Europe and Asia, he said, "The U.S. will lose its status as the superpower of the global financial system."
 
Germany's Foreign Minister Frank-Walter Steinmeier said earlier in the week, "The sole remaining superpower has lost credibility."
 
These are not doomsday prophecies predicting a future failure in the U.S. economy. It's already RUINED. The world knows it.
 
And how SIGNIFICANT that European banks have been largely unaffected by the collapse of America's economy. Spiegel attributes their stability to "more conservative banking practices" and applauds EU banks for having "steered clear of risky subprime-style mortgage lending."
 
As Bundesbank President Axel Weber noted earlier this week, "The German financial system is stable and its resistance to adverse shocks has markedly improved in the past few years."
 
U.S. Treasury Secretary Henry Paulson has appealed to America's "friends" in Europe for assistance in bailing out the U.S.-led global financial system. "We are talking very aggressively with other countries around the world," Paulson said on Sunday, "and encouraging them to do similar things, and I believe a number of them will."
 
In fact, THEY will not. And here again, how SIGNIFICANT that European states, particularly Germany, have resoundingly balked at America's plea for help. "The world shouldn't have to bear the burden for America's lapses," said Carsten Meier of the Kiel Institute for the World Economy.
 
Joachim Poss, deputy parliamentary head of Germany's Social Democratic Party, said, "The Americans can't make Germany accountable for their failure and their arrogance."
 
"The U.S. is the origin and the clear focal point of the crisis," Germany's finance minister said in his parliamentary speech, adding that its sickening impact will spread "worldwide like a poisonous oil spill."
 
Even German Chancellor Angela Merkel was uncharacteristically harsh in her criticism of America, saying Washington should have legislated tighter controls on the financial markets.
 
Similar sentiments were echoed in the European Parliament. "We should not forget that first and foremost this is an American crisis," the head of the International Monetary Fund said this week. "Therefore the job of dealing with the crisis should be fulfilled first and foremost by the United States."
 
It's more than unwillingness on the part of EU members to help the ailing American economy to recover. In their disdainful rebuke of America's reckless economic practices, some EU officials are practically gloating over America's misfortune. "It's a rare day," the Los Angeles Times wrote last week, when finance officials, leftist intellectuals and ordinary salespeople can agree on something. But the economic meltdown that wrought its wrath from Rome to Madrid to Berlin this week brought Europeans together in a harsh chorus of condemnation of the excess and disarray on Wall Street.
 
Yes, Europe is united in its self-righteous condemnation of the American economic model. And yet, how SIGNIFICANT that among European Union states, the United Kingdom is the one nation being lumped together with the United States. That same Times article noted, "Among the European economies, it is Britain's that most resembles America's in its vulnerability." As National Public Radio reported last week, "In Britain, many analysts expect the credit crunch to get worse. There are also fears that British companies unable to raise credit might be forced to close."
 
But rather than sympathize with their fellow EU member, the Continent sees the UK not as an innocent victim of a global crisis but rather as part of the problem. In calling for strict regulations to be imposed on financial markets, Chancellor Merkel made a point of singling out Britain along with the United States in an interview with a Munich newspaper. Merkel blames Washington and London for stonewalling Germany's attempt to bring greater transparency to the global financial system early in 2007.
 
The way Germany sees it, America is not the only problem-it's the Anglo-Saxon economic system that needs to be scrapped.
 
 
Robert Morley | Columnist

Does the EU Want America to Fall?

September 30, 2008 | From theTrumpet.com

A giant rift in monetary policy has left the U.S. and the rest of the West deeply divided. Is the European Union setting itself up to replace the U.S.?

America is on the ropes. Pummeled by the historic failure of its financial center, its economy is on the verge of collapse. America is now pleading with the world for assistance. But is there anyone to come to the rescue?
 
U.S. Treasury Secretary Hank Paulson is clearly in panic mode. On Friday, 119-year-old Washington Mutual, the largest U.S. savings and loan, bit the dust and was taken over and sold off by the government. Then yesterday it was announced that Citigroup would be "purchasing Wachovia, the fourth-largest bank in America, to keep it from collapsing. To facilitate the deal, the FDIC agreed to accept $12 billion worth of Citigroup stock in exchange for insuring hundreds of billions in near-worthless Wachovia-owned mortgages. These two failures join a list of sensational tragedies that now include: Bear Stearns, Indy Mac Bancorp, Lehman Brothers, Merrill Lynch, AIG, and Fannie Mae and Freddie Mac.
 
"It's all hands on deck," says Richard Yamarone, director of economic research at Argus Research. "Any and every entity, Treasury, the Fed and all central banks around the world are being summoned to right the potentially sinking ship."
 
Thus Paulson, President Bush and Federal Reserve Bank Chairman Ben Bernanke have pushed for what will be the biggest intervention in the financial markets by a U.S. government since the Great Depression-a multi-hundred-billion-dollar taxpayer check to purchase toxic mortgages and cover speculative derivative exposures that are imploding U.S. financial institutions.
 
Furthermore, Paulson has appealed to America's "friends" in Europe for assistance in bailing out the U.S.-led global financial system. "We are talking very aggressively with other countries around the world," he said, "and encouraging them to do similar things, and I believe a number of them will."
 
Unfortunately, Paulson is living in a dream world. Many of America's European "friends," if not already openly revolting against the U.S. financial system, certainly seem to be moving in that direction.
 
America's plan is "not a call for assistance; it's a scream for help," writes Germany's Spiegel. "Some countries are planning to help. But the German government has answered this call quickly and clearly: no" (emphasis mine throughout). Chancellor Angela Merkel slammed greedy American finance, criticizing the U.S. administration for not listening to German calls for tighter regulation. Finance Minister Peer Steinbrueck slammed America too, saying, "there will be shifts in terms of the importance and status of New York and London as the two main financial centers. State-owned banks and funds, as well as commercial banks from Europe [and elsewhere], will close the gaps, creating new centers of power in the financial world," and "the International Monetary Fund should become the controlling authority for the application of worldwide financial market standards."
 
Actually, German media from all across the political spectrum was extremely heavy in its criticism of the U.S. For example, the conservative Frankfurter Allgemeine Zeitung wrote:
As soon as the storm has died down, one will have to talk about the rules of the game. Central banks must intervene sooner to tackle price bubbles in asset markets rather than closing their eyes to them and then footing the bill at the cost of taxpayers.
Center-left Süddeutsche Zeitung wrote:
The downfall of the investment banks has hit America at its core. It shows that the country's boom was to a large extent founded on self-delusion.
And the left-leaning Frankfurter Rundschau wrote:
The Americans are exposing the world to a highly dangerous experiment. … Who would voluntarily lend an American bank money these days? All the authorities in Europe can do now is try to calm the markets with soothing words-and hope.
But Europe's biggest economy is not the only one disdaining America.
"It's a rare day," noted the Los Angeles Times, "when finance officials, leftist intellectuals and ordinary salespeople can agree on something. But the economic meltdown that wrought its wrath from Rome to Madrid to Berlin this week brought Europeans together in a harsh chorus of condemnation of the excess and disarray on Wall Street."
Even UK Prime Minister Gordon Brown says America's financial markets should be subordinated to a set of global rules and global regulators.
 
But French President Nicolas Sarkozy was perhaps the most critical. He said that the U.S. economic system was dead. And as a result, he said, it is "necessary to rebuild the entire global financial and monetary system from the bottom up, the way it was done at Bretton Woods after World War II."
 
That is a statement with huge implications, coming from another of America's supposed allies. In July 1944, the Bretton Woods agreement tied the Western democratic economies to America, established the U.S. dollar as the world's reserve currency, and helped usher in America's economic superpower status.
 
A rejection of Bretton Woods is a rejection of America!
 
"Sarkozy is building to make the crisis a wider struggle between Europe and the U.S.," reports the Guardian.
 
The European Union is trying to set itself up as the alternative to the now-defunct U.S.-centric economic system.
 
When the EU finance ministers met in the south of France on September 14, they publicly ruled out a U.S-style major stimulus package to ward off recession. Jean-Claude Juncker, finance minister and chair of the Eurogroup, said that U.S.-style interest rate slashing, spending increasing, and tax cutting only saddled economies with debt and otherwise had few positive effects.
 
Juncker wished America luck, saying Europe tried those methods back in the 1970s, and it pretty much ruined their respective economies.
 
The European Central Bank (ECB) also seems to be setting itself up as an alternative to the Federal Reserve System.
 
As the Fed has drastically whipsawed interest rates and injected billions of dollars into the financial system to prop itself up, it has done so at the expense of the dollar, rising inflation, and financial system credibility. In contrast, the ECB has been much more conservative, instead focusing on stability and protecting the reputation of the euro. Whenever a central bank makes money too easily available, it undermines the value of the currency and erodes confidence in the system.
 
But the point is that America and its European "allies" are on drastically different economic courses. And the losses the world has sustained because of the fraud-ridden financial investments that U.S. banks marketed to the rest of the world as AAA-safe investments are causing unparalleled resentment around the globe.
 
The current banking crisis in America has left America discredited and distrusted. Europe is rapidly setting itself up as the alternative to the U.S. system. And the euro, with all its own problems, has one big thing going for it: It is not the dollar.
 
The world is about to be introduced to a new economic superpower.
 
With America in free fall, the world is about to shift its confidence and its money elsewhere. Europe is about to inherit the global economic crown by default.
 
 

 

Why China Won't Come to the Rescue

By Bill Powell / Shanghai Friday, Sep. 19, 2008
The headquarters of investment bank Morgan Stanley is seen in New York City, Sept. 17, 2008
The headquarters of investment bank Morgan Stanley in midtown Manhattan
Mike Segar / reuters
 
If "once burned, twice shy" isn't an old Chinese proverb, it probably should be. As Gao Xiqing, the chief investment officer of China's $200 billion sovereign wealth fund, meets in New York City this week with Morgan Stanley CEO John Mack to discuss increasing the Chinese government's stake in the venerable — and flailing — investment bank, he bears an obvious burden.
 
Last December, the CIC (the China Investment Corp.) invested $5 billion for a 9.9% stake in Morgan Stanley (for which the bank must pay CIC a 9% annual dividend until 2010). On paper, that investment is now down more than 25%. Worse, Beijing paid $3 billion for a piece of the Blackstone Group just ahead of the private-equity firm's initial public offering last June — an investment that occurred about a nanosecond before the so-called subprime crisis began annihilating value on Wall Street and beyond.
 
Fairly or not, the Blackstone stake has since become the symbol in China of a naive bunch of foreigners getting hooped by Wall Street sharpies. It's been the subject of withering public scorn in China and has drawn pointed private criticism from the highest levels of the Communist Party, banking sources in Beijing and Hong Kong have said. The message: Never again. All of which makes CIC's critics in China wonder why Gao, a soft-spoken graduate of Duke University's law school (class of '86), bothered to get on the plane.
 
The answer, if the recent behavior of other sovereign wealth funds and foreign private equity houses is any indication, may be to deliver, in person, a simple message: No. Not again. Not unless you structure a deal in such a way that we simply cannot lose. Otherwise, goodbye.
 
That, in effect, is what Sameer Al Ansari, the CEO of Dubai International Capital, told Wall Street earlier this summer. He had had discussions "with all the people you'd expect" in the pantheon of U.S. finance regarding a possible investment from his fund, he told TIME. Wisely, it turns out, he told all of them no — and then set out on a tour of China to look at direct investments in companies that produce something other than toxic collateralized debt obligations. "There are a lot of other compelling places to look for investments these days," he said.
 
The decision a couple of months ago not to invest looks pretty smart today, and it's not clear, despite this week's carnage on Wall Street, that anything has changed significantly. To the extent that sovereign wealth funds are talking to desperate-for-capital bankers in the U.S. — and, as Gao's trip shows, they are talking — the terms of the discussions, one senior Hong Kong–based banker said today, are likely to be very harsh for any potential recipient of capital: "You're basically looking at structuring a deal at this point in which there is no downside — none. Even if a company goes under, like Lehman, you're first in line to get paid a return on your assets. Take it or leave it."
 
That's more or less the deal secured by Temasek, a sovereign wealth fund in Singapore, when it invested in Merrill Lynch. It dumped $4.4 billion into Merrill last December at $48 per share, but a downside protection clause meant the firm would make money even if the stock plunged to $24. It did — and then some. By late last week, Merrill traded at just over $17 a share, increasing the pressure on CEO John Thain to do a deal. Over the weekend, he sold the firm to Bank of America in an all-stock transaction worth about $29 per share for Merrill shareholders — which means Temasek could walk away with about a 20% return should it sell it shares. The Temasek deal last December, banking sources say, taught everyone in the region a lesson: If you're talking to Wall Street, drive as hard a bargain as you possibly can — or walk. They need you much more than you need them.
 
Now, moreover, even if valuations in the U.S. financial sector get more appealing should the market rout intensify, there's another factor in play: governments in East Asia and the Gulf want their funds to help domestic companies, not foreigners.
On Thursday, for example, Beijing's CIC announced it would make investments in three of China's biggest commercial banks — Industrial and Commercial Bank of China, Bank of China and China Construction Bank — that themselves are getting hurt by an economic slowdown and a real estate slump at home.
 
"This is a significant policy initiative aimed at supporting China's leading financial institutions at a time of global turmoil," says Jing Ulrich, chairman of China securities at JPMorgan in Hong Kong. It's another way of saying to CIC's Gao Xiqing, If you come home from New York having increased our stake in Morgan Stanley, it had better be the sweetest deal anyone in Beijing has ever seen.
 

Twice shy sovereign funds eye home markets

Reuters, Thursday September 25 2008
By Thomas Atkins
 
DUBAI, Sept 25 (Reuters) - Capital-hungry Western firms waiting for the Gulf cavalry to come charging over the hill will be disappointed, as sovereign wealth funds in the Middle East turn their attention, and billions of dollars, closer to home.
 
Stocks in the Arab Gulf have plunged in recent weeks as fears of fallout from the credit crisis spread. Tensions in the financial sector have mounted, with the UAE central bank opening an emergency facility to prevent lending from seizing up.
 
Even some of the biggest and sure-footed firms have seen shares hit lifetime lows, such as DP World, the world's fourth-largest container port operator, whose shares have fallen 43 percent so far this year despite growing business.
 
As a result, leaders in the multi-trillion-dollar sovereign wealth sector have rallied at home, saying they have unlimited funds to spend in support of weak shares.
 
"We are not responsible for saving foreign banks ... We have social and economic responsibilities towards our own country," said Bader al-Saad, managing director of the Kuwait Investment Authority (KIA), this week.
 
Saad speaks for a large part of the sovereign sector, which has seen share prices in the Gulf plummet to 16-month lows in recent weeks despite robust growth ensured by energy exports.
 
The KIA, one of the most outspoken funds, has said it has unlimited money to invest at home where economic growth is booming, but it will be highly selective in the United States and Europe, which are flirting with recession.
 

LONG WAIT

As Western growth shudders to a halt, economies in the energy-exporting Gulf are roaring ahead on a five-fold increase in oil prices since 2002. The credit crunch won't pass unnoticed but it's likely to be more of a scratch than a head-on crash.
 
The combined size of Gulf Arab economies is set to surge by almost a third to more than $1 trillion this year, surpassing India, with GDP growth in each country seen between 5.7 percent 10.9 percent, economists say.
 
Sophisticated Wall Street investment banks tripped up on complex instruments but Gulf banks are, for the most part, too small and undeveloped to get into similar trouble.
 
Professional investors, such as Frah Foustok, Chief Investment Officer at ING Investment Management Middle East, predict that domestic buying by sovereign funds will help drive big increases in stock prices in the Middle East.
 
"They are now repatriating much of that wealth into the region," she said.
 
The real estate sector is likely to need support as well, experts say.
 
Property prices in Dubai, for example, have risen 79 percent so far this year, with most experts predicting weakening as the global credit crunch limits lending and overbuilding dampens price pressures.
 
But the landing is expected to be soft, in part because sovereign funds are expected to prop up the sector.
 
"Real estate and tourism projects are the most vulnerable," said a Gulf-based banker involved in project finance. "I expect sovereign funds and central banks will need to buy a few more of these projects.
 
"But they are in a strong position to do so and I think if they manage it well we should see a soft landing for the Gulf," he said.
 
The threat of new regulations has also dampened the zeal sovereign funds once had for the West and turned their attentions toward home.
 
Before the credit crisis, Western nations were alarmed at the thought of rich Gulf Arabs buying up swathes of industries with newfound riches, saying they feared meddling by foreign governments.
 
The result was a deal brokered by the International Monetary Fund in Santiago this month, where the biggest funds agreed to abide by 24 principles, which have yet to be published.
 
But if the rules go too far, they might dissuade sovereign funds from expanding in developed economies at just the time when they might be missed most.
 
(Editing by David Holmes)
 
By The Nation
Published on October 2, 2008

Establishment of the Asian Monetary Fund could provide a regional financial security net

Last month, while Lehman Brothers was filing for bankruptcy and Merrill Lynch sought a merger with Bank of America, Supachai Panitchpakdi, the secretary-general of the United Nations Conference on Trade and Development, proposed that Asia move ahead to establish the Asian Monetary Fund to mitigate the global financial crisis.
 
"Global emerging markets should work together to avert a global crisis," Supachai told the Vietnam Economic Conference in Hanoi. "In the short run, actions should be taken including injecting funds and keeping interest rates from going up."
 
The Asian Monetary Fund, once established, would represent the hallmark of regional financial cooperation that could reshape the global financial architecture.
 
As the deputy prime minister between 1997 and 2001, Supachai has fresh memories of the Asian financial crisis, which was sparked off after the baht's devaluation.
 
One of the main problems then was the lack of a global lender of last resort. When Thailand faced a balance of payments crisis and lost almost all of its foreign-exchange reserves from the baht attack in 1997, it could not find any institution willing to provide credit to shore up its reserves.
 
The International Monetary Fund was not acting as lender of last resort, nor did the G-7 pay any attention to the Thai and Asian crises.
 
In Hong Kong in 1997, on the sidelines of the World Bank/IMF annual meeting, Japan pushed for the setting up of the Asian Monetary Fund as an institution to help prevent a future financial crisis. It was afraid of the contagious effect of the financial meltdown. Once the crisis hit one country, it could spread, like flu, to others. With its huge investment in Asia, Japan was concerned that a regional financial crisis could hurt its plants and investment.
 
But the United States shot down this Asian Monetary Fund proposal, fearing that it could rival the IMF, over which it has influence. Thanong Bidaya, the then finance minister, sought help from Alan Greenspan, the chairman of the Federal Reserve, and Robert Rubin, the US Treasury secretary. They told Thanong to work with the IMF programme.
 
Eventually, Asian governments came to Thailand's rescue, with the participation of the IMF and the World Bank. The US was only pulling the strings behind the IMF, without providing any financial assistance to Thailand. Eventually, the US$17.2-billion (now Bt584 billion) rescue package was wrapped up quickly. Thailand had to go through the painful IMF programme, which required it to close down insolvent financial institutions, keep interest rates high to defend the baht, protect creditors' rights, employ international banking standards and open up the financial markets for further foreign participation.
 
Indonesia and South Korea followed Thailand by asking for the bitter bail-out pill from the IMF.
 
In the US, with financial institutions running out of liquidity and facing insolvency, the Federal Reserve is now acting as a lender of last resort by handing out dollars to keep them afloat. It has also gone so far as to act as a safety net by bailing out the whole financial system. The US financial institutions are going broke, but the Fed still has the resources to bail them out.
 
But at the country level, there is no lender of last resort in the event of a country facing a liquidity crisis. The IMF, for all its bureaucracy and limited resources, is not a lender of last resort in the true sense.
 
If there were a lender of last resort, or the Asian Monetary Fund, in Asia, then the crisis could have been handled more smoothly. As it turned out, Washington dictated the conditions under the rescue packages, as it is doing now, clumsily handling the Wall Street debacle.
 
After the 1997 crisis, Japan and other countries came together to work on the building blocks to create the Asian Monetary Fund anyway. The member countries are the 10-nation Asean, plus Japan, China and South Korea.
 
They started off with the Chiang Mai Initiative, under which member countries would create bilateral currency-swap agreements to help each other in times of liquidity crisis. Currently these countries and Thailand are in the process of transforming the bilateral agreement into a multilateral one. The members would create a pool of reserves and allow them to borrow during times of abrupt, massive capital outflows.
 
The Asian bond market has also followed suit by deepening the regional capital-market development. This will help keep financial resources or excess reserves within the region to help finance projects. So far the reserves have been used to subscribe to US Treasury or OECD bonds.
 
Olarn Chaipravat, deputy prime minister in charge of economic affairs, is one of the champions of regional financial cooperation. He has been working on the building blocks for the Asian Monetary Fund for the past several years. With the US financial crisis threatening to spread globally, Olarn has suggested that Thailand expand its economic cooperation with other Asian countries.
 
The new government will seek closer financial cooperation with neighbouring countries in response to the turmoil in the global financial markets. Cooperation has already been implemented through the Asian bond initiative, he said.
 
So far, the Asian countries have reached step three or four in the 10 steps needed to create the Asian Monetary Fund, which will rival the role of the IMF. Asia is holding huge foreign-exchange reserves, with sovereign wealth funds from South Korea, Singapore, China and Middle East buying into assets in the US and Europe.
 
Going forward, the sovereign wealth funds from Asia and the Asian Monetary Fund will reshape the global financial system.
 
 
 
ALL YOU WANTED TO KNOW ABOUT VIETNAM... BUT WERE ONLY TOO UNSURE TO ASK!

CLICK HERE !  ( Microsoft Internet Explorer Only ! )

© Since December 2003, there have been network session connections to this site