Mar 09, 2009
KREMS, Austria - Obsessed as
we are about our own crumbling economy, it's hard for most Americans
to see and appreciate the global nature of the crisis and how it is
impacting, and will impact, others throughout the world. We don't recognize
how many in other countries blame the fall of their own economies on
a kind of "financial aids" born in the United States.
And even as protests spread
with Britain just putting its own army on alert for fear of disruptions
this summer by anarchists with bent on class war with slogans like "burn
a banker," mass demonstrations show no sign of abating in France,
Iceland, Ireland Greece and other EU countries. People here have politicized
economic issues perhaps because of a more thorough and diverse
media environment as well as an expectation that their governments have
a duty to protect their people.
When I arrived in Vienna for
a film forum and festival at the Danube University, I was surprised
to see merchandise and remainders marked down to flea market prices
at stalls in the usual pricey booths at an airport usually only known
for pedaling luxury brands.
Some think the European Union
and the Euro zone may not survive the tremors. European Commission President
Jose Manuel Barroso said on Friday. "The European
Union is facing an
unprecedented situation due to the economic crisis and needs to work
at different levels to restore credit flows." He said the bloc's economy
is expected to contract by 2 percent this year.
General Motors wants a bailout
from European governments, too, with 32,000 jobs at risk.
Eastern Europe is feeling the
crunch even worse with its currencies reeling. Western Europe has so far
declined to come to their requests for more bailouts from Hungary, for
example, once a model for how the free market can replace Soviet bloc
There are waves of protests
underway in the East. Left publications report:
"thousands of demonstrators
in Lithuania, Latvia and Bulgaria have attacked government buildings
and called on their governments to resign as unemployment soars in Eastern
Experts predict a regional
increase of 15 million to 18 million unemployed in the coming months,
with no relief as jobs for immigrants disappear in Western Europe and
the United States."
Writes Mike Whitney: "The
global economy is decelerating at the fastest pace on record. 40 percent
of global wealth has been wiped out. The banking system is insolvent,
unemployment is soaring, tax revenues are falling, the markets are in
shock, housing is crashing, deficits are soaring, and consumer confidence
is at its lowest point in history."
When you look at some of the
numbers, you can see the time bombs that are ticking away. According
to Ed Bonawitz, many countries are in deep hock, "Ireland's external
debt, at US$1.8 trillion, equals 900% of the country's US$200 billion
GDP. The United Kingdom's external debt of US$10.5 trillion equals 456%
of its US$2.3 trillion GDP. Switzerland's external debt of US$1.3 trillion
equals 433% of its US$300 billion GDP." Now that the credit markets
are locked tight, renegotiating the terms of these loans is virtually
impossible.' U.S. Banks are said to have a loan ratio of around 26-to-1.
And European Banks have one that is around 60-to-1.
F. Wiliam Engdahl writes: "The
problems in Eastern Europe which are just now emerging with full force
are, if you will, an indirect consequence of the libertine monetary
policies of the Greenspan Fed from 2002 until 2006, the period where
Wall Street's asset backed securitization Ponzi Scheme took off.
The riskiness of these eastern
European loans is now coming to light as the global economic recession
in both east and west Europe is forcing western banks to pull back,
refusing to renew loans or 'rollover' the credits, leaving thousands
of borrowers with unpayable loan debts. The dimension of the eastern
European emerging loan crisis pales anything yet realized...
According to my well-informed
City of London sources, the new concerns over bank exposures to eastern
Europe will define the next wave of the global financial crisis, one
they believe could be even more devastating than the US sub-prime securitization
collapse which triggered the entire crisis of confidence.
Because of globalization and
the interwoven nature of the world economy, what is happening there
will make things worse for us here,
Reuters reports: "A new report
suggesting Eastern Europe's economic slump will drag Western banks further
into the red fanned fears that emerging economies will deepen the recession
in the West. No wonder international agencies are up in arms."
One issue that is just getting
attention Europe is unregulated activity by Hedge Funds and controlling
enormous amounts of money stashed in untaxed off shore accounts. European
leaders have now agreed a tough stance on hedge funds, the highly speculative
products that many blame for fuelling instability in financial markets.
Another major issue involves Swiss Banks. US tax authorities demanded
the names of 52,000 Americans banking in secret accounts to evade taxes.
Bloomberg reports: "In the
past two weeks, Finance Minister Hans-Rudolf
Merz said he's
willing to collect taxes on offshore accounts for the U.S., and Justice
offered cooperation on some cases of tax evasion.
"That's de facto abolishing
banking secrecy," said Regula
Staempfli, a Swiss
political scientist in Brussels.
There is also a darker dimension
with reports that legitimate businesses are turning to the mafia and
organized crime gangs for the billions they need to stay in business. Douglas
Farah writes in the Counterrorism blog:
"There is strong anecdotal
evidence that cartels from South America to Southeast Asia and Europe
...are stepping in to credit breach, building relations with businessmen
desperate to stay in business, who would not normally look to the "informal"
economy for a loan.
This will serve to extend the
tentacles of these groups even further into the legal society and financial
structure. As (one) article notes, "Stronger organized crime means
a weaker state."
A story in the Washington Post
"says a new report estimated that organized crime syndicates in Italy
- including Naples's Camorra, Sicily's Cosa Nostra, Calabria's 'Ndrangheta
- collect about 250 million euros, or $315 million, from retailers
every day. That is about a billion dollars every three days, or
about $122 billion a year siphoned out of a single economy. Is it any
wonder Italy is a constant economic wreck?"
If trends continue, there is
apt to be more opportunities for the criminal class and more of a fusion
between so the supposedly legitimate business world and the supposedly
Tony Soprano, are you paying
Regulators are also monitoring
missing money. Here's a headline from the Financial Times: "Lehman
Brothers' US liquidators have asked Barclays to explain what happened
to an estimated $3.3bn earmarked for bonuses and other liabilities that
the UK bank received when it acquired part of the bankrupt Wall Street
company last year?
Funny business like this seems
to be part of the way this business is run.
Increasingly, banking bosses
are sounding like mob underbosses. Here's a quote attributed to Jimmy
Cayne, former chief of Bear Stearns about Tim Geithner who engineered
the sale of his bank to JP Morgan at a sizable loss:
"The audacity of that
p- in front of the American people announcing he was deciding whether
or not a firm of this stature and this whatever was good enough to get
a loan ... This guy thinks he's got a big d-. He's got nothing, except
maybe a boyfriend ... Who the f- asked you? You're not an elected officer.
You're a clerk. Believe me, you're a clerk. I want to open up on this
f--r, that's all I can tell you."
This is getting nasty. It may
be time to go to the mattresses. As economies crumble and the center
doesn't hold, as poet W.H, Auden wrote, things fall apart.
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