If you haven’t been living under a rock lately, you are probably aware that the world economy is going loco these days. The stock markets drop like there’s no tomorrow and especially many banks are in deep shit. Governments all over the globe are in a frenzy, trying to stabilize the markets by pouring money into financial institutions. Banks in the US, Iceland and UK are already kept artificially alive in an attempt to avoid total collapse, and many more are likely to follow. It appears we’re well on our way into a recession, and parts of the story behind it might interest you.
A Session About Economics
Understanding the world economy is not easy, but it helps to know a couple of somewhat simplified facts. The world economy is ultimately based on trust, and not the value of real, solid-to-the-touch goods and products like you might think. The time when the value of money was equal to the amount of gold in a national banks treasury, is long since gone. Now, when there’s a financial crisis, a lot of fancy financial theory can be applied in an attempt to describe it, yet, ultimately it boils down to the fact that trust is what keeps everything afloat. “They” might talk about loans and liquidity, but basically it’s as simple as this; when peoples trust start to waiver, we see what’s happening right now. Stock markets drop like there’s no tomorrow.
In the title of this post, I mention 9/11. What’s that got to do with anything? Well, maybe more than you think. You see, what many people may not realise, is that 9/11 was more than an attack at the twin towers on Manhattan. It was more than yet another a terrorist attack against the “infidels” and an attempt to strike at the heart of the enemy. 9/11 was in fact an attempt to crash the entire world economy by striking fear into the hearts of everyone and pulling out one of the fundamental bricks in the pyramid of trust that is the international economy, and it nearly happened too. World Trade Center was one of the very centers of the international financial system, but even then, its importance to the world economy was relative. One thing is that the towers housed hundreds of businesses, many within the financial sector, and they all got knocked out in one blow. A lot of people died and a lot of things stopped working for a time. Even then, this was only a tiny fraction of the people and businesses that work within the financial sector and the psychological value of the attack far outstripped the actual human and economical costs caused by it. The really important thing was the fact that the attack scared and shocked people everywhere, making people less willingly to invest, spend money and travel, with major impact on the world economy and a potential crack as result.
Luckily, the markets proved more mature than one could initially hope. We got through 9/11 in a short time perspective, and despite of periodical setbacks in some industries, weapons and arms manufacturers boomed and by 2003 things where starting to go better again.
Nice way of summing things up...
But, hold on for a second! What exactly is happening today? It’s at least partially plausible to link 9/11 with the present day financial situation. Ironically, what Al Quaedas attack on WTC didn’t accomplish initially seven years ago, may be happening after all. As you know, Al Quaeda and 9/11 triggered the wars in Afghanistan and Iraq, wars which is one of the major reasons Bush have had to spend so much money in his two terms. The wars was and still is, costly. Latest figure I read was that Iraq alone cost 10 billion USD every month. That’s not counting the indirect costs like for example thousands of wounded soldiers returning home, requiring medical aid and social benefits. These wars have put a great strain on the US and any other nation would have collapsed financially already, but the US, is as we know, an economic superpower. Also, the wars probably ensured Bush his re-election (..”I am a war president” etc), meaning he could continue his irresponsible politics.
As you see, I’m claiming that Bush is a considerable factor behind whats happening now and I have some proof too. Now, don’t get me wrong, I’m not saying it’s not Mr. Bush’ fault alone that the economy is going down the drains these days, he only acted within a financial system that’s been ill for a long, long while. Yet. his disastrous economical politics was probably a decisive factor in setting off the current crisis. Bush have been a firm believer of an economical policy advocating deregulation and less possible control of everything that’s got to do with financial stuff. If he had tried to regulate and develop the US’ financial laws and policy, we would probably not be where we are today. Bush simply ignored Clinton’s period of relative calm sensibility and continued Regan and his fathers policy, and the result was that many greedy bastards could roam the stock markets more or less free, with few limits and boundaries. Ultimately, Bush himself admitted the defeat of his economical policy when they saved Fannie Mae & Co, and lately, hurried a gigantic rescue pack in an attempt to “fix” the economy they, themselves, participated in ruining. Mind you, such government-involvement in the “free” market is unheard of since the great depression.
No financial whiz-kid..
It’s Failed
Read the facts. The US national debt is all-time high and the social differences and issues are more noticeable than ever. Close to 50 million Americans are without health insurance, there’s still massive differences in employment and income between the different ethnic groups and these differences haven’t decreased over the past decades. In the US, as in the rest of the world, the massive majority of the wealth belongs to a tiny percentage of the population. I think this pretty darn well spells out “failed economical policy” with a topping of some serious injustice.
This could all have been sort of “tolerable” (it’s the Americans, they elected the bastards, what do we care?), had not the modern world been so closely knit together as it is. The world have become a gigantic interconnecting web, where everything is in one or other way connected to everything else. This phenomenon, particularly in an economical, cultural and political sense, is called globalization. No man and no country is an isle, and another mans doing is every-one’s disaster. The last thing Bush or any other American president is free to do, is making decisions without thinking of the effect it can or will have on the rest of the world. The status of the US as a great power and economical cornerstone of the world, indirectly gives their politicians (and voters) a greater responsibility than their counterparts in most other countries.
Both in theory and practise it seems that the capitalist system do not work. It’s not self-regulating, the best products are not available for the lowest prices and everyone certainly don’t have the same “shot at glory”. Fundamental capitalist theory do simply not apply to real life situations any more than pure old-fashioned 1917 style Marxism-Lenism do. If you’re agreeing to the concept of everyone being created equal, having the same rights and should have the same chances in life, well our present world-wide economical system do not make that happen. Sorry to disappoint you.
You should really think people and politicians had learnt after the many financial crises we had in the last century, but it appears that greed always win, in the end. It is clear to me, that as long the rich got their hands deep down politicians pockets, the average Joe Sixpack, regardless of nationality, will live at the will and whims of people we do not know or trust. People who’s only goal in life is to accumulate riches for themselves with no regard for their fellow man. Now it’s getting about time to end this rant, and I’m thinking for myself, yes actually hoping that perhaps one day, the power will truly belong to the people. That those exercising power on behalf of the people, will really do it for the people, and not their rich friends who paid for their election campaign. Yet realistically this is just a nice dream and I truly don’t see this happening, anytime, but at least you can hope ;) Finally, until people realise that you cannot measure success in economical growth alone, and that long periods of growth does not mean everything is working and all right, well, you better get used to seeing front-pages like the one from The Economist.
Mr. Bin Laden having fun.
I, for one, think Mr. Bin Laden is having some good laughs in his cave somewhere. The 9/11 incident did indeed crash those towers, but it didn’t crash the world economy. Yet, you can very well choose to interpret todays situation as a result of 9/11 and thus maybe he did succeed after all..
[rant off]
Update 23.10.2008: If you know the Norwegian language, the Norwegian newspaper, Dagbladet has an interesting article on the relationship between the 2008 crack and the 1873-crack. Nice reading!
