traders watching stocks.
(photo credit: Rafael Marchante/Reuters)
Yes, you’ve read it here before, and no doubt elsewhere as well. Many times.
That’s the whole problem.
Three years have passed since the great
financial crash of 2008, and – despite the expenditure of vast sums of money by
governments around the world on bailouts, stimuli and assorted interventions in
every possible shape and size – nothing substantive has changed.
reason that is so is because all those governments share a common problem.
Irrespective of their political stripe and ideological hue, they are all in
denial. So are their advisers and senior officials; if any of them held the kind
of views that allowed them to face up to reality, they would not have been
selected for their posts, nor would they continue to hold them.
explains why though there are more and more economists and assorted experts in
the US and elsewhere researching and publishing interesting ideas and proposals
relating either to specific aspects of the crisis and how to deal with them or
to the overall systemic imbalances and how to redress them, none of their ideas
and proposals are being implemented. Only the same wornout, stop-gap, band-aid,
kick-the-can-down-the-road temporary fixes are being used – needless to say, to
no avail whatsoever. The basic truth that a debt crisis cannot be solved by
borrowing more will not go away.
As an aside, for those interested:
Jeffrey Sachs has written a new book, The Price of Civilization
, and a two-page
piece in Time magazine summarizing his main ideas.
They are well worth
reading, especially if you are a believer in the Republican mantra that cutting
taxes will solve all our problems; but then again, if your mind is closed, don’t
In a different direction: An outfit called the New America
Foundation brought together three experts – one of whom, Nouriel Roubini, is
famous, the others not – to write a paper called “The Way Forward;” it’s only 35
pages long and hence easily readable and also worth reading. Again, you don’t
have to agree, but you do have to think about real solutions for the very real
problems facing every country and the world as a whole.
But if you are a
head of government, then apparently you don’t have to think. You just have to
spout drivel – or so it would appear. Take the most recent instance as a classic
example of the process at work: Yet another Sunday “emergency” conference
between French President Sarkozy and German Chancellor Merkel concludes with yet
another press conference. The entire financial and business world waits to hear
what they will announce, because everyone knows that “time is running out‚”
But what they actually announce is a firm promise to announce
something substantive before November 3 – which is when the G-20 ( the world’s
largest economies, including the rising ones, as opposed to the G-7 or G-8,
which includes only the declining ones) will next meet.
In other words,
Merkozy have no plan. If they had one, they would announce it. If they had an
outline, they would leak it. If they had ideas, they would float a trial
balloon. Instead, they pretend that sometime soon they will present something.
Meanwhile, more or less as they spoke, a large Belgian bank was being bailed
Since it was too big for little Belgium to save, France had to help
out. Perhaps it was a trial run for the French, who will have to bail out some
of their own giant banks soon.
Meanwhile 2: Last Friday, before the
Merkozy powwow, Italy and Spain were downgraded, the latter by two
Meanwhile 3: On Tuesday, the newest member of the euro club,
also the poorest and one of the smallest, Slovakia, arrested the world’s
attention because one party in the four-party coalition refused to approve the
plan to boost the euro-zone bailout fund (called the EFSF, but never mind) that
was announced at a European Union summit on July 21. That proposal is now
hopelessly out of date, as reality has raced ahead and the 21 percent “haircut”
it envisages (i.e., write-down) of the value of Greek government bonds is far
too small: 60% is now being reluctantly admitted to in official circles, so it
will certainly be more.
Meanwhile 4: The risible idea that China will
bail out bankrupt European countries – still widely believed in European
official circles – was further exposed as plain silly, when China announced that
a state-owned investment fund would start buying shares of the biggest Chinese
banks, to stop or at least slow their rapid fall on the Chinese and Hong Kong
There are more meanwhiles, and it’s still early in the week
(have to file this early because of Succot). But they all add up to the same
thing: Meanwhile, denial reigns supreme, the problems fester and the pressures
in the financial system mount, while the credibility of leaders and institutions
sinks ever lower.