Archive for the ‘Crises’ Category
I’ve tried to not write of late. Tried. It isn’t easy. You’ve got be made of reasonably stern stuff if your inclination is to face the world with a keyboard during times like these. So why not write? For one, I’m not that informed. Sadly, neither is anyone else. Anyone who tells you she/he is in a position to call the cards is a liar or worse. Second, I think there is enough commentary. What we need now is calm analysis, policy ideas, and planning.
Eastern Europe is disintegrating. That’s the immediate crisis. With it goes the banking systems of Western Europe…especially Austria, England, Belgium and the Netherlands. wipe out those banking systems and the Euro starts to collapse. If the Euro goes South, recovery in the US becomes all the harder. People are still generally expecting the US to lead out of this nightmare. Hard to see it, but that is the expectation.
I have heard informally things are particularly bad for the UK if Eastern Europe burns. It looks like it might. Latvia, Estonia, the Ukraine, Hungary, Romania and Serbia look particularly bad. All are volatile…all rest close to a corrupt and foreign currency rich Russia. It’s a lot of sparks next to a pile of dynamite.
The IMF and ECB need to focus on that problem set first. Summer is coming and the priority is food and enough energy to survive next winter. Second, there has to be a plan for getting manufacturing off its back. That’s going to entail more government debt…has to. There is no other short-term way, and there isn’t a long term without a short term.
Governments are going into survival mode. They need time for something positive to happen. What that might be, I cannot say. But they need time…at least 9 months…probably 15 months. Without that much time, a series of cascading collapses continues the current run. Time is needed to start laying out enough policy to get something going. Time can only be bought with government debt and currencies that are worth something. On the other side, the resource rich countries and the wealthy of the East are going to have to be debt buyers. I don’t see another way.
If we choose market collapse in the hope of some market-driven recovery, it will end violently in ways we don’t now comprehend. One could imagine serious civil wars in Mexico, Russia, Venezuela and in Eastern Europe…or starvations/deflations that erase a generation and allow corruption to take hold in places it is in retreat. It’s all about time right now. Time to stabilize through micro-reorganizations, new visions, new parties, something.
Jim Manzi points to Conor Clarke taking on the fundamental truths of economics…here.
I’ve been talking amongst friends now for over a year about the gravity of the UK’s situation. Calculated Risk pointed to this Roubini comment saying the UK is not the next Iceland–which Jim Rogers apparently claimed it might be. I didn’t see Rogers’ comment. He’s often a little bit on the theatrical side but I always like hearing what he has to say.
The political demands to keep Sterling are obviously profound. Britain still sees itself as a global player of empire-level importance. This separate stand will work against the UK in the long run I suspect.
Still the UK is adding debt at a dangerous rate and the truth is, no one, Rogers or Roubini included, can forecast where this comes out for the UK with any plausible accuracy. Iceland was a smaller economy and much more at risk of short-term radical bank failures. Iceland has several hundred thousand people. The UK has tens of millions. Still, to see ancient institutions like the Royal Bank of Scotland crash and burn is more than bit troubling. The UK is certainly the large economy that is most distressed right now. Spain and Germany are also struggling, but as I interpret the data, they look to be a bit more in conventional recession than the institutionally challenged UK.
In sum, I doubt both Roubini and Rogers. I think the future is far too murky to forecast accurately just yet. We definitely need to see an end to the decline of real estate prices in both the UK and the US (as well as Spain and Ireland, etc.) before financial stability is going to return.
Here’s Der Spiegel on the catastrophe that is German banks.
John Kemp at Reuters throws in his 2 cents. I think Kemp is closest.
According to ScienceDaily, the Arctic is warming at a faster pace than other portions of the Northern Hemisphere. This of course is going to lead to more rapid sea rises and other related problems (destroyed fisheries, coral bleaching, etc.) at earlier than anticipated junctures.
Taleb is a smart guy. He’s shattering shibboleths and holy rules right and left it seems…or at least trying to. I’d take him seriously. Charlie Rose seems to: here.