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USA !No Longer a Financial Superpower
Ali Ettefagh
Dr. Ali Ettefagh serves as a director of Highmore Global Corporation, an investment company in emerging markets of Eastern Europe, CIS, and the Middle East.
The Current Discussion: Will the U.S. financial crisis lead to an erosion of U.S. influence comparable to the Iraq war?
Two major events can break a powerful person or enterprise, club or country: cancer or uncontrolled growth (that is to say, bad decisions or assets, poor management and lack of preventative medicine) or heart attack (i.e. lack of liquidity, a just-in-time supply of oxygen with blood). The financial crisis is a mix of these two diseases. It has already eroded Americas standing the world, even though counterparties and the other side of the transactions are the closest political and military allies or significant trading partners and investors-- EU, Japan, Brazil, China and most of OPEC (except Iran) and the savings, pension funds and share values of their people. Added damage to credibility is deemed toxic when banks, in the same country, are leery of lending overnight money to each other and where the second layer of most trusted investments-municipal bonds- is frozen.
The damage suffered is intrinsically different from the attack on, and subsequently getting stuck in, Iraqa historical financial basket case, a receiver of aid for decades from Sunni Arab nations, and a country living on worlds equivalent of a Food Stamps program (oil-for-food). The planned $700 billion rescue of Wall Street is a few billion dollars more than all Iraqi oil export revenue since the Second Gulf War of 1991.
Many friends of America politely abstained from the Iraqi adventures of Uncle Sam. But they are now extending more credit to an ally in need. They are buying bonds, lending short-term money to the Federal Reserve (to inject in the financial system) and setting up rescues of their own banks exposed to gremlins and toxic assets originating in American markets. Mind you, all of these coordinated efforts, of the American government and its foreign friends, could partially take the poison out of the deep financial wounds of America, but it is not sufficient to heal deep wounds.
The world is noticing. In a recent parliamentary statement last week, the German finance minister, Mr. Peer Steinbrueck, announced that the United States is no longer a financial superpower.
In a hastily arranged crisis meeting with his EU colleagues on 2nd of October, the German minister has repeated the state position that the origin and center of the gravity of the problem is clearly in the USA. Nor does it go unnoticed that Germany is among the top ranking financial powerhouses of the world, a strong and grateful ally of the United States, a core main member in the G8, NATO and the politico-economic block of the European Union, an exporting nation, and a very visible investor and employer in China, Brazil, Russia and the United States and Mexico.
America has practiced a unique version of politics over the last ten years. An ultra-right militarist doctrine (the so-called Project for a New American Century) is mixed with relaxed fiscal discipline, evaporated supervisory regulation and a belief that credit and good times flow endlessly. Rules and controls on internet traffic were in place, but no one saw the need to put down traffic rules for movement of money. In turn, this unique inward set of self-belief failed and subsequently burned through Americas credibility, its treasure of strong finance and its standing at home and abroad after Americans surpassed their affordable borrowing limit (as a ratio of income needed to repay principal and interest on existing debt). In recent reports of Morgan Stanley and the Federal Reserve Board, total private and public debt in America, before adding in provisions for hidden, unfunded liabilities (such as Medicare and Medicaid) is reported to be about 350% the national GDP, having passed the historical watershed of 300% of The Great Depression back in 2003.
Many quickly compare America with the ancient Rome and say that, just like Rome, America is coming unglued during its crisis of its third century due to its peculiar religious Christian edict after 9/11 mixed with a loss of control over money and tax. But the adertised end of the world, it is not. There is only one end to the world. In a fair observation, current events in America are a definitive and significant end of an era, a period of about 65 years after the second World War, albeit an era loaded with other historical events such as man on the Moon, the microchip and the Internet, and the end of communism and the Cold War. At the same time, it signifies the need for fiscal discipline, a trigger of a complete rethink of international politics and reinvention of finance in the New World.
It might be useful to review the last ten years and frame it in the modernized context of the Napoleonic Era on speed dial: a southerner was installed in the seat of power as president (by litigation, to contrast with Napoleons coup détat) with a view of the world from a narrow perception of abrasive, confrontational settings, an indecipherable enigma, and a self-perceived need to constantly remind the world of American military power with rough divisive talk. It was a relapse to a search for an ideological adversary. He who dared to search for an alternative doctrine was trashed talked, threatened, sanctioned or internally swift-boated. Thus, Le Grande Armeé went eastward, got bogged down in a costly conflict longer than Americas engagement in the Second World War, depleted the treasury and morale of the country, set up a spiral of leverage and distributed skewered debt to pacify the home territory. And like the Russian campaign of Napoleon, the Iraq war put an end to the riddle that the American military and its commander in chief is an undefeated genius and the most powerful man of the planet: over the last ten days, President Bush has made four internationally-televised, frantic public appeals to the owners of his country, the American people and the Congress, to fund the Paulson Plan. In a meeting with congressional leaders, Mr. Bush said: If money isnt loosened up, this sucker could go down.
It might also be useful to recall Winston Churchills words that a fanatic is one who can't change his mind and won't change the subject. Alternatively, we can revert to Lenins observation that sometimes, history needs a push. Chances are that Americans, and the rest of the world, are deep in thought to reassess their future and standing of America as she stands in the middle of the twin toxic brews of financial and military quagmires.
PostGlobal.COM
Ali Ettefagh
Dr. Ali Ettefagh serves as a director of Highmore Global Corporation, an investment company in emerging markets of Eastern Europe, CIS, and the Middle East.
The Current Discussion: Will the U.S. financial crisis lead to an erosion of U.S. influence comparable to the Iraq war?
Two major events can break a powerful person or enterprise, club or country: cancer or uncontrolled growth (that is to say, bad decisions or assets, poor management and lack of preventative medicine) or heart attack (i.e. lack of liquidity, a just-in-time supply of oxygen with blood). The financial crisis is a mix of these two diseases. It has already eroded Americas standing the world, even though counterparties and the other side of the transactions are the closest political and military allies or significant trading partners and investors-- EU, Japan, Brazil, China and most of OPEC (except Iran) and the savings, pension funds and share values of their people. Added damage to credibility is deemed toxic when banks, in the same country, are leery of lending overnight money to each other and where the second layer of most trusted investments-municipal bonds- is frozen.
The damage suffered is intrinsically different from the attack on, and subsequently getting stuck in, Iraqa historical financial basket case, a receiver of aid for decades from Sunni Arab nations, and a country living on worlds equivalent of a Food Stamps program (oil-for-food). The planned $700 billion rescue of Wall Street is a few billion dollars more than all Iraqi oil export revenue since the Second Gulf War of 1991.
Many friends of America politely abstained from the Iraqi adventures of Uncle Sam. But they are now extending more credit to an ally in need. They are buying bonds, lending short-term money to the Federal Reserve (to inject in the financial system) and setting up rescues of their own banks exposed to gremlins and toxic assets originating in American markets. Mind you, all of these coordinated efforts, of the American government and its foreign friends, could partially take the poison out of the deep financial wounds of America, but it is not sufficient to heal deep wounds.
The world is noticing. In a recent parliamentary statement last week, the German finance minister, Mr. Peer Steinbrueck, announced that the United States is no longer a financial superpower.
In a hastily arranged crisis meeting with his EU colleagues on 2nd of October, the German minister has repeated the state position that the origin and center of the gravity of the problem is clearly in the USA. Nor does it go unnoticed that Germany is among the top ranking financial powerhouses of the world, a strong and grateful ally of the United States, a core main member in the G8, NATO and the politico-economic block of the European Union, an exporting nation, and a very visible investor and employer in China, Brazil, Russia and the United States and Mexico.America has practiced a unique version of politics over the last ten years. An ultra-right militarist doctrine (the so-called Project for a New American Century) is mixed with relaxed fiscal discipline, evaporated supervisory regulation and a belief that credit and good times flow endlessly. Rules and controls on internet traffic were in place, but no one saw the need to put down traffic rules for movement of money. In turn, this unique inward set of self-belief failed and subsequently burned through Americas credibility, its treasure of strong finance and its standing at home and abroad after Americans surpassed their affordable borrowing limit (as a ratio of income needed to repay principal and interest on existing debt). In recent reports of Morgan Stanley and the Federal Reserve Board, total private and public debt in America, before adding in provisions for hidden, unfunded liabilities (such as Medicare and Medicaid) is reported to be about 350% the national GDP, having passed the historical watershed of 300% of The Great Depression back in 2003.
Many quickly compare America with the ancient Rome and say that, just like Rome, America is coming unglued during its crisis of its third century due to its peculiar religious Christian edict after 9/11 mixed with a loss of control over money and tax. But the adertised end of the world, it is not. There is only one end to the world. In a fair observation, current events in America are a definitive and significant end of an era, a period of about 65 years after the second World War, albeit an era loaded with other historical events such as man on the Moon, the microchip and the Internet, and the end of communism and the Cold War. At the same time, it signifies the need for fiscal discipline, a trigger of a complete rethink of international politics and reinvention of finance in the New World.
It might be useful to review the last ten years and frame it in the modernized context of the Napoleonic Era on speed dial: a southerner was installed in the seat of power as president (by litigation, to contrast with Napoleons coup détat) with a view of the world from a narrow perception of abrasive, confrontational settings, an indecipherable enigma, and a self-perceived need to constantly remind the world of American military power with rough divisive talk. It was a relapse to a search for an ideological adversary. He who dared to search for an alternative doctrine was trashed talked, threatened, sanctioned or internally swift-boated. Thus, Le Grande Armeé went eastward, got bogged down in a costly conflict longer than Americas engagement in the Second World War, depleted the treasury and morale of the country, set up a spiral of leverage and distributed skewered debt to pacify the home territory. And like the Russian campaign of Napoleon, the Iraq war put an end to the riddle that the American military and its commander in chief is an undefeated genius and the most powerful man of the planet: over the last ten days, President Bush has made four internationally-televised, frantic public appeals to the owners of his country, the American people and the Congress, to fund the Paulson Plan. In a meeting with congressional leaders, Mr. Bush said: If money isnt loosened up, this sucker could go down.
It might also be useful to recall Winston Churchills words that a fanatic is one who can't change his mind and won't change the subject. Alternatively, we can revert to Lenins observation that sometimes, history needs a push. Chances are that Americans, and the rest of the world, are deep in thought to reassess their future and standing of America as she stands in the middle of the twin toxic brews of financial and military quagmires.
PostGlobal.COM
The metldown is sinking them faster than anyone had ever thought.
