of Raffaele Sciortino
In Davos, disconsolate, the global elite has had to take note of the failure of first two attempts september-saving banks and then the Paulson-plan to stop or just stop the crisis in the States that autumn is indeed in global terms. The money from the first half of the Tarp (350 billion) to banks has served barely cover losses accumulated in the first three quarters of 2008, already announced losses for the last quarter than expected. The sea of \u200b\u200bliquidity injected, without controls, the Bush administration has not reactivated the circuit of credit that has continued to languish. And here is on the horizon after the subprime mortgage bubble "safe", the commercial real estate, car loans and credit cards, student loans, not to mention that state governments already knocking at Washington. In short, a nightmare for the newly elected president.
The article focuses on the immediate context and the debate in the States on the policy response to the crisis and then repeat the point about the US-China relationship (see the first episode: The first truly global crisis? ) mentioned in passing in the basic questions.
The article focuses on the immediate context and the debate in the States on the policy response to the crisis and then repeat the point about the US-China relationship (see the first episode: The first truly global crisis? ) mentioned in passing in the basic questions.
http://sadefenza.blogspot.com/2009/02/la-prima-crisi-veramente-globale.html
New Package ...
Obama in this situation, however, has not had an easy life Congress in passing his stimulus package economy, large in absolute terms (almost $ 800 billion), but many, like the liberal Krugman, considered still too low for effective recovery. Democrats and moderate Republicans have got a nice scissor kick in the funds of more social spending (such as education for the poor)-who have already shouting to the danger of a "socialist democracy in favor of the notorious tax "(!)- cuts (especially tax cuts for the rich and middle class). Despite the depth of the crisis, the establishment does not want to hear about the provision of social securities, which could become permanent rights: he knows too much Welfare! Obama has outlined a reaction against the "clumsy criticism of the plan based on the theories that led us to the crisis" and "unhealthy habits of Washington" with his obstructionism on the so- Washington Post on February 5. It has embarked on a tour of the places hardest hit by the recession (moderately) to evoke a back pressure "from below", but start asking for "help people and not the banks" ( The anger of the unemployed against Obama ) . A reaction, however, too shy and "post-partisan" if its Newsweek sounds the alarm: the president would risk losing control of the situation while allowing opponents to the initiative ( Losing Control Michael Hirsch ). Half measures all disappointed, but without strong conflict nothing new agenda!
But the real node that is beyond vague recommendations for restrictions on compensation to executives of banks Obama can not go much further if it is true that the need for save the financial system is also out for him debate: "we need to work effectively with the banks to clean up their balance sheets in order to restore confidence in financial markets," he told a press conference on February 9. You the green light to the concessions to the banking system and rescue of the shareholders at the expense of the taxpayer without offsetting common even in terms of oversight, not to mention property (the word nationalization as taboo). With some restriction and control in most of the way it is already tapped by Paulson under Bush jr., Which have boosted the state budget deficit in 2008 to $ 1.2 trillion, the highest share of GDP since World War II, while the Treasury (the largest contributor to foreign and China) is expected to leverage at least $ 2 trillion in 2009. But the risk of U.S. dollar debt and you remember-from 'the Democratic Economist Brookings Institution - solely and exclusively to ask the new administration to put in the hands of the worst review of the few remaining social welfare programs (Social Security, Medicare, Medicaid). Class struggle from above . It will take a very different reaction that Obama's tour to avoid that the crisis is being drained down . ... same bailout
The picture of the U.S. banking system is black Roubini, a prophet of doom has so far not contradicted by the facts, provides $ 1.8 trillion of losses (on a 3.6 scale global) bad debts for the next 12-18 months compared with a capital stock of only 1.5 trillion (but Goldman Sachs estimates is even heavier: article of ' Economist ).
The problem now is clearly the same "experts", no longer from the time of low liquidity in relation to specific types of assets but the real default on a very wide spectrum of investment activities (Citigroup has suffered a second bailout the end of November, Bank of America, the largest in the U.S., looks set to receive new aid from the government together are worth less now than 50 billion). The question begins to emerge is: how solid the entire U.S. financial system? However, Washington has no choice but to try to put her to allow deleveraging, the cleanliness of assets in default of financial institutions.
The frame in which to place the decisive intervention of fiscal policy adopted is therefore that of the overall government plan to rescue the system. Repeated and vague references in the ads speak volumes about the difficulties and internal conflicts in the same team Obama. The democratic basis and in particular the party Obama, even picking up the impatient but still confused on the move in society, would allocate the additional aid to homeowners defaulting and the local government and criticize the shopping banking "practiced by banks with funds from the TARP. The Bernanke Fed does not want to listen to reason and requires massive injections of new capital from the government in the banking system and the federal guarantee if you do not buy the "toxic assets" ( The Fed warns Obama ). Wall Street obviously adds some of his absolute opposition to any kind of control.
E 'this party very well represented at the White House, Larry Summers to Geithner. Announced only in general terms on February 10, the plan is merely taking up the idea of \u200b\u200bbad bank -but without calling it this way-a mixed public and private institutions would buy bad loans Financial an amount from 500 up to $ 1 trillion to encourage the resumption of bank credit "good" with new injections of capital. Also added a refinancing of consumer loans by the Fed and Treasury for a further 1 trillion (a new bubble in consumption?) And subsidies to the owners defaulted on 50 billion. Despite the contrasts between presidential advisers are not made on site effective restrictions on lending activities of banks receiving this planned cleanup of the budgets at the expense of the public ( article in the New York Times ). As you can see, we're pretty far from the proposals of liberals like Robert Reich (former Minister work in the first Clinton administration) who would like to state aid tied to the resumption of bank lending to households and businesses Krugman or favor that the state has more say in institutions or saved the same Roubini offering the same to reduce the debt burden on borrowers otherwise insolvent. End of proof: the party of Wall Street is far from defeated and defeatist.
The basic problem, however, is yet another and more serious. As Martin Wolf noted on Financial Times (see article ) announced measures, basically a remake of the Tarp already failed, would be meaningless if it were a "simple" liquidity crisis and the current problem is the dramatic ' insolvency, bankruptcy of the fact that most financial institutions whose assets (two to three trillion) worth less than the debts. Niall Ferguson, already being a supporter of empire in the States and then passed to the party Chimerica - is even more dramatic: the bad bank is already there and is the Federal Reserve but is not able to overcome the explosion of 'World debt with additional debt even if public.
E 'clear why Wall Street does not want to sell the "toxic assets" at market prices now close to zero: deducted the budgets would fall in the value of bank stocks by decreeing the immediate closure of most of them. Not only that there would also be a fallout on the holders of securities other than banks, you know, had specialized in download own risk. Decreed the devaluation of a large part of the securities-what is really needed in the abstract-concrete is made even more difficult by the fact that losses would not be just the bankers, but all those who have linked to finance the integration of its income, in terms of additional wealth and, above all, in terms of support (by the mortgage on the house to the pension fund, etc.).. On the theoretical level this overlap finance / "economy real is the real "new" historical to be investigated. In practical terms makes all the problems of difficult resolution. At the same time save the shareholders with artificially high prices would mean from the state to throw out a sea of \u200b\u200bmoney just to cover losses on investments without raising failed, since it is possible, the 'real economy' ( U.S. fund banks shareholders ). The bubble burst this time the center and no going back!
Understanding the crisis?
So there is already concern among eggheads U.S., which Obama not get done, do not know how to field "strength and ferocity" of the new Martin-Wolf-sufficient. Moreover autumn here in the hope that thanks to the presumed decoupling Asian growth continues at a rapid pace by pulling out of trouble by avoiding the States too drastic choice is gone. Moreover, the recession not only has crept deep into Europe, West and East, and Russia but the risk is going from failure to financial systems were behind them (article The Economist). Needless to rattle off here herd data and uncertain forecasts, suffice to say that according to the IMF is for the advanced countries the deepest recession since World War II ( IMF update ) while the flow of capital to the so-called emerging countries is clearly contracting with Eastern Europe at particular risk ( release IIF).
In fact, among the rubble of the sad 'science' of the economics (Anglo-Saxon and Anglophile), is there anyone who started to say things as they are not even going beyond the financial relief. Roubini: beyond the occasional cause of the subprime is the excess credit on a global scale that has created a bubble after another hour driving to a deflation from debt ( article Foreign Policy ). Ferguson: The Western world is suffering a crisis of over-indebtedness and because it was the explosion of public debt ( Los Angeles Times article ). Johnson Peterson Institute (in testimony before the Senate): the underlying cause is found in the global boom financed by debt which now exposes the vulnerability of government bonds ( The Global Economy: Outlook, Risks, and the Implications for Policy ). And there are also those from Harvard makes comparisons with the Soviet economy artificially overloaded ( New Article York Times). As if peering between the Marxian economic categories did fictitious capital (basic connection of the overall capitalist reproduction provided you do not understand it trivially as speculative as opposed to "real", but this in another episode).
In recent months Washington has flooded markets with over $ two trillion-the Fed is printing money like crazy, wrote in December, the Wall Street Journal- without this having been able to raise a question holding down overall indebtedness. He also lowered interest rates almost to zero thrusting himself in a classic liquidity trap. On the horizon then, and this will be a decisive factor between the contours of the new "American dilemma " stand increasingly clear: those who continue to buy dollars-already depreciated more than ten trillion in Treasury bonds-in a world in crisis and short of cash good? And who will finance the package, or the next packet of Obama? And, anyway, under what conditions?
Shock therapy, but over whom?
If this is the case where the care? The stimulus obama part evil and part of the incomplete and still in deficit spending will not have significant impact than one year not to mention that most likely the money will be used to pay off their debts rather than to revive consumption. The public debt increases, but at most only be able to buy time for a breath of fresh air. Confusingly there is a growing feeling that the most painful operations and structural are inevitable. After all Obama himself, before getting sucked in by bureaucratic politics in Washington, here and there has already mentioned the need to transform the very model of development with which the United States have gone ahead in recent decades to avoid creating new bubbles (this concern in Europe was the only carrier Merkel). It is said that if social conflict emerges, not will be forced to raise the jackpot. The nature of the choices
fronts in the field are still vague, confused and cross intertwined with the embryonic social forces. Post-Keynesian liberals like Robert Reich not go beyond the demand (however insignificant) to end the stagnation of real wages of U.S. workers by mid-seventies who has forced the average family first women to work outside the home and longer hours and then into debt. A converted Jeffrey Sachs goes to touch a taboo in the States now indisputable: it is necessary to raise taxes on the rich, along with infrastructure investments and the prospect of a global Keynesianism , an agreement cooperation with China (article realclearpolitics ). Are positions that require a relatively autonomous Obama leading by big powers, which, however, would require at least one step in the movement that led up ... In the meantime
a part of the front neoliberal globalist already seriously concerned about the fate of the world market and the U.S. leadership and we promptly riconvertitasi state intervention, is pushing for a breakthrough. Perhaps you regard the failure of phase I of the Obama administration to sponsor a shock therapy that focuses on the direct and full state control, even temporarily , the banking system. This would be, from what is given to understand so far, leaving their fate to the institutions 'toxic' (now impossible to distinguish between good and bad assets) and in the meantime set up with public capital and a scratch-off sound banks that can return the credit to real investment. This would be left dead and wounded on the field as "excellent" between shareholders and creditors, however, deemed irrecoverable, but would save the system and above all avoid the questioning, with the tightening of the crisis, the U.S. leadership in the world (Financial article Times ). A once-only event intended to cancel debt rather than to create new ( Los Angeles Times article ) preferable to the slow agony. In the hope thereby to "move resources out of the financial sector to the manufacturing, technology and other innovation-based" real "(ie non-financial) (article Peterson Institute ) to avoid 'immediate reform of new bubbles. And to refocus on this basis the problem of global imbalances between the U.S. and the world, starting with China, without giving up control of world currency by the dollar.
E 'this is probably the rewriting the rules of what is thought in these circles: the multilateral WTO weblog is abandoned in favor of a strategy of agreements "plurilateral" charged with the critical mass of emerging countries, particularly looking to China moves possibly at the expense of the EU. It would be the equivalent in foreign economic policy of that "multilateralism à la carte" theorized by the U.S. strategic thinking, forced to retreat, as a weak variant of unilateralism in the context of an increasingly "polar" (Article Foreign Affairs) to manage, beyond the rhetoric, no grand bargain . The weak side of these positions is currently still in the cut technocratic: whether it is by no means of operations "technical" painless but a huge redistribution of property titles, such as currency exchange after a war, whereas it would be inevitable pressures and counter- and perhaps even conflict from the bottom to the purposes of the "nationalization of a single day." And what about the loss of reputation in the market as such: it would be devoid of social and political consequences? As for the international implications is reckoned the unleashing of competitive capital injections but not many states (among others see an Italy clearly run out of resources) at the time may afford the loss of parts of the street system ( article Peterson Institute ) . But as the reaction of international actors who would see more heavy devalued its dollar reserves?
This node calls the "nuclear ," as The Economist has called it a few months ago ( Economist article), or the possibility of outright cancellation of U.S. debt download statistics . One option that definitely has to mind the "hawks"-unload to start business as usual-but which currently seems unlikely in its strong version because all exacerbate international relations from a position of relative weakness in the U.S. and China would force a sudden turn one hundred eighty degrees. Would not be unusual if we look at the crisis of the Bretton Woods arrangements in the '71-'73 with the end of convertibility of the dollar, albeit in a less globalized. It also has the major advantage, just as the rest of any monetary policy, to appear in some way "neutral" as the command of the coin the most fetishistic, in the Marxian sense of social relations disguised as a relationship between things can be.
The transition to the States is therefore obliged and complicated at the same time: how to safeguard the very possibility of taking on the world's wealth, the dollar and financial income, and domestic debt and devalue the whole country? It 'probably in the first instance we will try again to use the Asian credit (most of the nearly three billion dollar per day in 2007) but this time to finance operations of a real drain on the same financiers of the crisis and proceed with an adjustment in this inner-advantage in this recall Obama's "rebirth of America." But between intentions and reality ... there's just China.
first spark with China?
Even before officially
access to the office of U.S. Secretary of the Treasury, Mr. Geithner was able to trigger the reaction of the impassive Chinese diplomacy officially accusing Beijing of manipulating the exchange rate of the yuan, in a "war of words " certainly not due to a lapse in linguistics ( Economist article ). In those days, in Davos, Chinese Premier Wen Jiabao accused the U.S. of lying about having a "pattern of unsustainable development." A month before an editorial in the China Daily government had warned the U.S. not to expect continual flow of foreign capital at low cost for more massive bailouts ( Wall Street Journal article ). Finally, in an interview granted to the official tones Financial Times during his European tour, still Wen Jiabao has called one of the causes of the crisis the global imbalances caused by "some" economies, indicating the possible change of strategy with respect to reserves foreign currencies once the crisis has passed, however, reserves with which Beijing is not the bloodless ricapitalizzerà cases without a reorganization of the IMF's voting rights in favor of the third world (Financial Times article ).
unusual tones, not to overstate certainly indicate that the onset of the Presidency Obama was "shocking" ( The soft power of China over Africa ) for the Chinese leadership, including charges, caveats, and especially fears on Washington's ability to manage the crisis. A crisis for the first time that affect the same mechanism, access to the U.S. domestic market in continuous expansion, which is based on the growth of the Asian country by the post-'89 onwards, and at the same time unlike the Asian crisis '97 also shows the vulnerability of China to the dark side of globalization. That is not putting at risk the plot tout court with the Yankee capital-crucial diplomatic recognition from Journal of '79 at the end of rapprochement and the launching of reforms in denghiste then-but it certainly could be the crack of a global economic complementarity purely win-win (benefits for both partners, although not symmetrical) so far undisputed while continuing tensions on regional security arrangements in East Asia (since beyond this perimeter, against the excesses involved in the Pentagon, China on the military at the time wrong). All this will lead to Beijing for sacrifice broad spectrum.
Beyond the moves already in place (see the gradual conversion of dollar reserves from 70% to 45% and the packet stimulus to domestic demand) and likely attempts to shift the medium to long-term (less dependence on U.S. markets and greater regional integration in Asia, continuing the economic offensive and soft power in Africa and Latin America) - the basic problem for China is the extreme difficulty conversion of the growth pattern so far below even apart from a possible U.S. reactions DISCOUNT diversion to other shores of currency reserves. Both quantity and composition of the Western countries are crucial for exports of final goods technology also mean that Chinese factories assemble and processed from imported components from other countries in the East Asia region. The plot, therefore, can not obscure regional dependence on the final destination (that is, even in Japan who can not get up) and especially by binding to double-locked with the circuit's overall debt. China a growth pole "alternative" if only to Asia should produce more for the domestic market and export to countries with arrears after having financed a kind of Marshall Plan. All seven-eight hundred million farmers, of which three hundred below the poverty line is estimated much more cautious on the Chinese economy from the World Bank, revised last year against the expectation of "overtaking" on the States. And do not forget that the surplus is still largely commercial in nature and not from investments abroad.
"In this marriage, divorce is not an option" (Brookings article ) in the short to medium term. This does not deny that from this crisis and the relationship is destined to become, beyond the will of the actors, and more contrasted by the most demanding U.S. and predatory . And 'this is the essential step facing us today, even if it is too early to grasp the full implications. (Which we can also say something of metamorphosis in the crisis of globalization: more topic to be researched). From the beginning, probably, Washington will ask the revaluation of the yuan and, in general, leveraging economic interdependence and military superiority, taking more risks (ie cost: economic but also social and political internal ) from Beijing . In return, the counterparty will make some concessions in terms of access to decision makers worldwide (but how real?) Without any commitment on the actual rewriting of the rules of the international game. These are essentially a call correo where China will be "invited" to participate in the rescue of counterparty ( article in Foreign Affairs ), Which were to succeed, ultimately makes the relationship even more lopsided. Also giving a sharp blow to the strategy of the emergence denghista "hiding" that has managed to avoid with the 'peaceful rise "direct confrontation with the hegemonic power.
China is therefore likely to find themselves having to deal too early, in the midst of economic ascent is still very unbalanced, and reluctantly, or without having in hand the initiative, with the knots tighter of dis-order international thought far can definitely point to a relatively balanced multipolarity outcome (with a sort of "revisionism Quote "- see: After the Wall of Andornino). Now he can not afford to stand back or confrontation with the United States. At the same time must start to think of any viable alternative in the future to avoid being swallowed up. Tricks of "peaceful coexistence", at the time Soviet doctrine already condemned by the Chinese for "revisionism" but that no Russian leader would have interpreted the point of letting themselves be dragged so deep in the Grand Strategy of Uncle Sam ...
Chimerica is not in good health or on the U.S. side nor on that of China. If so, determine today how it will reconfigure this relationship in the process of renegotiation is not a matter to be addressed at the table. Rather, it is intertwined with the social conflict that is expressed in new forms already-blurred but recognizable among the forces behind Obama's victory and a thousand streams of protest in China, and whose dynamics, that yes, the index will be decisive the depth of the crisis. (A crisis that refers to violent and unavoidable reminder of fictitious capital in the "reality principle" of the relationship with the exploitation of the worker total now extended to the entire social life and natural. What helps to qualify the global crisis as a crisis of reproduction Overall company's capital now covered by debt: here the similarities to the '29 show is totally inadequate since then the transition from formal subsumption to the real one, now fully deployed).
What we can assume is that the Washington-Beijing axis persisted with what will become even less stable and fluid, intended to repeated highs and lows rather than do the basis for a new order in which the two poles regulate each other. It seems unlikely and too linear to read it in opposite terms but basically symmetrical decline of U.S. hegemony (but what and where the substitute?) Or the rise of a Chinese self-development model that sitting alongside (Arrighi). However, we have before us a Bretton Woods II rewriting with international rules for the simple fact that this has already happened, and who came from Sino-American rapprochement of the early seventies and contemporary context to the crisis of the first Bretton Woods. Which explains why the post-'68 and post-anti-colonial movements was temporarily exceeded and reconstructed with a spatial and social dislocation and a new accumulation of regulatory circuits based on debt and culminated in a globalized world (simply choose purely political or reversible feature of the system always!). Now the ratio and the whole structure cracked. And if the States were in some way to boost the collection, the route with China would be real clash accelerated due to the global overcapacity. The disorder is high in the sky ...
February 2009
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