For Immediate Release
Wall Street Teeters, the Empire and China Shake
Markets nosedive, recession spreads, world financial system shaken
WASHINGTON - On Wednesday, markets in New York were rocked again as anxieties ran high after the 'government's bailout of insurer American International Group left investors with little confidence in many banking stocks'. The market was unnerved 'by news that the Federal Reserve is giving a two-year, 85 billion dollar loan to AIG in exchange for a nearly 79.9 percent stake in the company, which lost billions in the risky business of insuring against bond defaults. With the markets rattled, waiting to see who the next victim could be, shares of two other major financial firms Morgan Stanley and Goldman Sachs, sank 24 percent and 14 percent respectively'.
In a column titled 'Socialism, 21st Century Style' by Floyd Norris, chief financial correspondent, said 'the government nationalized the American International Group - That is not the official version.' They do not want to reveal that the government will now control A.I.G. The idea is that 'it will have a warrant allowing it to take 79.9 percent of the stock whenever it wants. But they contend there is no control until the warrant is exercised. The Federal Reserve and Bush Administration believe the threat of defaults by A.I.G on a lot of unregulated derivative contracts create a national emergency. It's too bad they didn't think of that when they were opposing any efforts to regulate these markets. That would have been interfering with free enterprise. This move somehow is not'.
Doug Henwood, founder and editor of the Left Business Observer stated that there was the idea that the U.S can to into a crisis of recession but the rest of the world would be fine. He thinks it is unlikely to happen since Western Europe is now in recession along with Japan who also looks to be in recession. The major question is China, which keeps on growing, but for how long? Do they have enough export markets to keep them going? U.S is disliked by a number of countries in ways we haven't seen since the Vietnam War, and their economic problems are visible for the world to see. This weakening of the great hegemonic power may result in great instability. China is not ready to take over, and neither is Russia, so there may truly be political instability.