by hilzoy
The NYT has a set of op-eds on how the market meltdown looked from Europe. It’s worth a read. Ireland:
“The old saw “safe as houses” no longer cuts. And money in the bank is no longer “money in the bank.” We did not think the system could fail, but late last month government officials, in a dawn announcement, told us they had been compelled to give a 400-billion-euro guarantee to the banks, which were running out of money. It has been estimated that if the banks have to call in that guarantee, it will bankrupt the country for the next 37 years. And it will get worse.”
“ICELANDERS have woken up in a new novel by Franz Kafka, where everybody is guilty by default. One by one, the mighty banks have been seized by the government, and Icelanders, aghast, have been told that each and every one of us owes millions of dollars — to whom, we don’t know. The earnest faces of the politicians, of bankers and tycoons almost crying, give us the final touch of the surreal. The situation is comparable only with the fall of the Berlin Wall in 1989 and the 9/11 attacks — something final and yet beyond one’s individual grasp has happened. (…)
Suddenly, there are lines in the bank for foreign currencies, and there is a limit on how much we can get — overseas banks are refusing to accept our freefalling currency, the krona. One of my students, studying in Spain, can’t get money from Iceland for her rent. Importers and exporters can’t get currency to conduct business. Icelandic tourists abroad have problems getting cash from A.T.M.’s. The British government has applied terrorist laws to freeze the assets of an Icelandic bank; the list goes on as if it were a script for the nightmare of globalization.
We thought we had friends, in Europe and in the United States. They were sought in the hour of need and found to be busy with their own problems; only the Scandinavians were prepared to extend a helping hand, and then, all of a sudden, Russia — somehow the world has changed.”
And then there’s Pakistan (not from the same series):
“The Zardari government is sailing into a perfect storm of political instability and economic turmoil. The economy is in a virtual freefall. International agencies have slashed its credit ratings. The rupee has hit an all-time low against the dollar. Capital flight is believed to be continuing despite efforts to stop it. Suicide attacks and kidnappings have led to the repatriation of foreign skilled labor. The bourses are a blood bath as foreign investors continue to pull out. Unable to pay its bills, the government has taken to issuing I.O.U.s to private- and public-sector companies. Overall inflation is at a punishing 30-year high. Power shortages, the worst in at least 15 years, are disrupting businesses already hurt by higher input costs. To top it off, much-needed funding and easier terms promised by Pakistan’s allies and multilateral donor agencies have yet to materialize. Foreign-exchange reserves, worth about two months of imports, are fast running out—and with the worsening economic situation, so is public patience.
For its part, the Zardari-led coalition government, already besieged by political rivals and insurgent groups, has had to take unpopular measures to prop up the economy. It has raised taxes, upsetting the business community. It has trimmed government spending, prompting bureaucrats to grumble. It has increased tariffs on power, angering consumers and businesses already fed up with outages. And it has phased out subsidies on imported fuel, leading to price increases in everything from bus rides to cooking oil and prompting small, periodic protests.”
Inflation in Pakistan is running around 24%. Per capita income was around $1,000 before this crisis hit; it’s a lot less in the rural areas. China has just assured Pakistan that it will not allow the country to default on its loans; this is important because Pakistan has been hemorrhaging hard currency, and it wasn’t clear how it was going to manage otherwise. But Pakistanis are in for a world of hurt regardless.
It’s going to be tough here, but we will not get the worst of it.
I may be wrong but it seems bitterly ironic that the largest legacy of the recent era of economic globabization may have been to create a series of economic and political problems so deeply interlinked with each other that the only solution which will actually work to get us out of this mess is a global coordinated effort in which no country can go it alone, i.e. we must all hang together or we will most assuredly hang separately.
The New World Order – brought to you not by black helicopters and the UN, but by bond traders on Wall St.
LeftTurn, I don’t think most of the black-helicopter believers would be at all surprised that Wall Street traders (which is to say the Jews) are behind things. It’s all one conspiracy.
TLTIABQ: I was actually having a strikingly similar thought while reading this. I’ve always been a huge fan of an author named Daniel Keys Moran, who wrote a series of books wherein the UN Peacekeeping Forces (PKF) averted a global crisis by seizing the orbital anti-missile laser platforms and using them to enforce some NWO peace thing at the point of, well, an orbiting sword or ten.
It strikes me as implausible, but not so much anymore as it did when I was younger. The world is a different place, and I have no difficulty envisioning any number of scenarios out of this crisis that end with a single dominant global currency that is not the dollar. Possibly the euro, or the yuan.
When the fabric of things breaks down, people look to a higher authority, a higher order, to save them. States and major institutions failing have to go to the government for help. When whole economies and governments start failing, who do they go to but each other? And when they can’t rely on each other?
I’m not saying it’s a good idea. I’m not saying I particularly like it as an outcome. I’m just saying that we are on the verge of a global collapse so total and wide-ranging in its effects that all bets are off in terms of what’s far-fetched and what’s plausible. It would indeed be ironic if the New World Order came in the form of a New World Currency.
I may be wrong but it seems bitterly ironic that the largest legacy of the recent era of economic globabization may have been to create a series of economic and political problems so deeply interlinked with each other that the only solution which will actually work to get us out of this mess is a global coordinated effort in which no country can go it alone, i.e. we must all hang together or we will most assuredly hang separately.
It does seem a bit like the economic version of the political mess that caused WWI.
China has just assured Pakistan that it will not allow the country to default on its loans;
Anyone else seeing a potential justification for military action in that?
“The British government has applied terrorist laws to freeze the assets of an Icelandic bank;”
Could someone explain the rationale behind this? And what about our own “Patriot Act”.
Anyone else seeing a potential justification for military action in that?
It’s just local politics. Pakistan shares a common ‘enemy’ with China.
The rationale behind invoking the Anti-terrorism, Crime and Security Act 2001 seems to have been as follows:
Gordon Brown last night branded Iceland’s failure to guarantee British savings in its failed banks as “totally unacceptable and illegal”, amid warnings that more than 100 local councils, police authorities and fire services have up to £1bn lost in its bankrupted system.
Charities, including children’s hospices, warned they were at risk of losing £25m.
In unusually aggressive terms, the prime minister said he was willing to use anti-terrorism legislation to freeze the assets of other Icelandic companies operating in Britain in an effort to recoup the lost money. (The Guardian)
Then
Iceland’s health minister threw diplomatic convention to the wind when he attacked Gordon Brown on public radio. […] “Gordon Brown made the calculated decision that to raise his ratings in the polls, it would be ideal to attack Iceland. This has been made very clear,” said the minister, Gudlaugur Thor Thordarson. (BBC News)
And here’s a bit more background:
The Icelanders are hurt that the British government acted under the Anti-terrorism, Crime and Security Act 2001, specifically Part 2, Article 4. […] The Act is in fact very broadly based and says that assets can be frozen in the UK if the Treasury “reasonably believe” that “action to the detriment of the United Kingdom’s economy (or part of it) has been or is likely to be taken by a person or persons, or action constituting a threat to the life or property of one or more nationals of the United Kingdom…”
The person against whom action is taken has to be either a foreign government or resident.
It is not clear why the Act and not another had to be used but one suspects that it was to hand and was quick. (from another article on the BBC website)
“The British government has applied terrorist laws to freeze the assets of an Icelandic bank;”
Could someone explain the rationale behind this?
They didn’t actually use terrorist laws, but part of the Anti-terrorism, Crime and Security Act 2001. This has other non-terrorist material added into it, because UK governments feel that you can never have too much criminal law on the statute books. (My husband works for a firm of legal publishers and the criminal law book is always the one that needs substantial rewriting every year).
The governemtn also like having statute law worded so loosely it can be applied to almost anything. According to the BBc report, this section allows assets of foreign individuals or government to be frozen if there is a belief that: “action to the detriment of the United Kingdom’s economy (or part of it) has been or is likely to be taken by a person or persons, or action constituting a threat to the life or property of one or more nationals of the United Kingdom…” which seems to my untrained eye to allow almost anything.
Thanks Laura and magistra. Not sure I feel any better about it though.