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Wednesday, October 22, 2008
Wednesday, October 15, 2008
Surprise! The World Didn't End, but ...
It looks like the better part of Eastern Europe is going into IMF receivership. On Monday Hungary put in a request for financing with the IMF, followed by the Ukraine, Serbia and possibly the Baltic states in the last few days.
According to the Daily Telegraph, Iceland made a request to the IMF board for help in the financial crisis, over the weekend. A week earlier Iceland said it would seek a loan from Russia, but perhaps the terms were not so favorable. (I can imagine Putin/Medvedev demanding the air base at Keflavik and an annual tribute of sacrificial virgins.)
So the financial meltdown won't be a dramatic apocalypse, but rather a long, drawn-out, slide into austerity for the US and Western Europe. Eastern Europe and the rest of the semi-periphery will take it in the shorts in the form of lower consumption, lower pay and the drive to produce more exports to pay off the latest round of loans. The social safety net will also take another beating in the interest of cutting government debt at the behest of the IMF.
And I promise that the next post will be about food. Honest.
According to the Daily Telegraph, Iceland made a request to the IMF board for help in the financial crisis, over the weekend. A week earlier Iceland said it would seek a loan from Russia, but perhaps the terms were not so favorable. (I can imagine Putin/Medvedev demanding the air base at Keflavik and an annual tribute of sacrificial virgins.)
So the financial meltdown won't be a dramatic apocalypse, but rather a long, drawn-out, slide into austerity for the US and Western Europe. Eastern Europe and the rest of the semi-periphery will take it in the shorts in the form of lower consumption, lower pay and the drive to produce more exports to pay off the latest round of loans. The social safety net will also take another beating in the interest of cutting government debt at the behest of the IMF.
And I promise that the next post will be about food. Honest.
Friday, October 10, 2008
Is Rome Burning?
Well, yesterday I received my TIAA-Creff quarterly report. I haven't opened it yet. I am not so sure I want to. Granted, I have twenty-five or thirty years before I need to retire, but still its really disappointing to see my retirement savings take such a merciless shellacking. Worse still I am not sure what this means for my parents and their financial future. How are they supposed to get along?
What is more disappointing, and even downright alarming is that the response by the Bush Administration and even the states of the European Union, has been so disjointed. Check out the Paul Krugman editorial for thursday if you can stomach it. I suspect that this is one of those moments in History when the events make the men.
For months now the mainstream media has told us two things. One, that Ben Bernanke and Henry Paulson are really smart. They have the technical knowledge and professional expertise to fend off financial catastrophe. (Recall the countless stories about Bernanke's academic credentials and expertise on the History of the Great Depression). If there is a problem, we were told, these men will know what to do and when to do it.
The second trope was that the next intervention will solve the problem. Think back to the fed sponsored buyout of Bear Sterns, the nationalization of Freddy Mac and Salley Mae, or the Bush plan to help home owners refinance their subprime mortgages. These interventions were supposed to stop the slide into a global financial crisis. The interventions may have slowed or deflected the slide, but it looks like we are in a global financial crisis and probably a deep recession.
The failure of these earlier interventions suggests that expertise of Bernanke and Paulson are proving irrelevant to the course of events. Whatever is decided by 'the wise men' from North America and Europe this weekend in Washington DC, it might all be too little too late.
What is more disappointing, and even downright alarming is that the response by the Bush Administration and even the states of the European Union, has been so disjointed. Check out the Paul Krugman editorial for thursday if you can stomach it. I suspect that this is one of those moments in History when the events make the men.
For months now the mainstream media has told us two things. One, that Ben Bernanke and Henry Paulson are really smart. They have the technical knowledge and professional expertise to fend off financial catastrophe. (Recall the countless stories about Bernanke's academic credentials and expertise on the History of the Great Depression). If there is a problem, we were told, these men will know what to do and when to do it.
The second trope was that the next intervention will solve the problem. Think back to the fed sponsored buyout of Bear Sterns, the nationalization of Freddy Mac and Salley Mae, or the Bush plan to help home owners refinance their subprime mortgages. These interventions were supposed to stop the slide into a global financial crisis. The interventions may have slowed or deflected the slide, but it looks like we are in a global financial crisis and probably a deep recession.
The failure of these earlier interventions suggests that expertise of Bernanke and Paulson are proving irrelevant to the course of events. Whatever is decided by 'the wise men' from North America and Europe this weekend in Washington DC, it might all be too little too late.
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