The banks used some of the funds to lend, but also to purchase other banks, to pay off debts and to simply hold in reserve should they need the funds in the future. TARP [Troubled Asset Relief Program] has become a program in which taxpayers are not being told what most of the TARP recipients are doing with their money, have still not been told how much their substantial investments are worth, and will not be told the full details of how their money is being invested, Barofsky said.
Even before this global financial crisis took hold, some commentators were writing that the US was in decline, evidenced by its challenges in Iraq and Afghanistan, and its declining image in Europe, Asia and elsewhere. On the practical level, the US is already stretched militarily, in Afghanistan and Iraq, and is now stretched financially. On the philosophical level, it will be harder for it to argue in favor of its free market ideas, if its own markets have collapsed.
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The era of American global leadership, reaching back to the Second World War, is over… The American free-market creed has self-destructed while countries that retained overall control of markets have been vindicated. The director of a leading British think-tank Chatham House, Dr Robin Niblett … argues that we should wait a bit before coming to a judgment and that structurally the United States is still strong.
America is still immensely attractive to skilled immigrants and is still capable of producing a Microsoft or a Google, he went on. It has enormous resilience economically at a local and entrepreneurial level. China is in a desperate race for growth to feed its population and avert unrest in 15 to 20 years.
Russia is not exactly a paper tiger but it is stretching its own limits with a new strategy built on a flimsy base. India has huge internal contradictions. Europe has usually proved unable to jump out of the doldrums as dynamically as the US. But the US must regain its financial footing and the extent to which it does so will also determine its military capacity. If it has less money, it will have fewer forces. In Iceland, where the economy was very dependent on the finance sector, economic problems have hit them hard.
The banking system virtually collapsed and the government had to borrow from the IMF and other neighbors to try and rescue the economy. In the end, public dissatisfaction at the way the government was handling the crisis meant the Iceland government fell. A number of European countries have attempted different measures as they seemed to have failed to come up with a united response. For example, some nations have stepped in to nationalize or in some way attempt to provide assurance for people. The plan is supposed to help restore consumer and business confidence, shore up employment, getting the banks lending again, and promoting green technologies.
For decades, structural adjustment policies in the developing nations often strongly encouraged by the wealthy nations has created poverty or made things worse. Now, with such a severe financial crisis industrialized nations from Greece, to UK and others are contemplating strong austerity measures and cutbacks on public services — much like the structural adjustment the developing world had to endure for as much as 2 decades.
When Countries, Markets Collide
As such, the new Conservative government has insisted that because of high spending of the past government, they have no alternative but to cut back on all manner of social spending all while various bankers get ready to be rewarded with more bonuses! Yet, as Professor Ha Joon Chang noted at the end of , the fall in tax revenues has made the deficit hard to sustain , not government spending per se: Companies and individuals have been unable to earn as much as before the recession so the fall in that revenue for governments leaves their previously high spending look like immense bureaucratic waste holes.
Excessive cuts, he warns, can even push a country further into recession if it is not addressing the core causes of the crisis in the first place. Stories of strikes and protests are increasingly commonplace, and if the experience of developing nations are anything to go by in previous decades , similar protests are likely in the future in industrialized nations.
One such example is in Ireland that has recently seen a bailout package from the EU, IMF and others require an austerity budget, much like the harmful structural adjustment policies the developing world went through. Other Eurozone countries such as Portugal, Italy, Greece and Spain are also facing potential problems, while Iceland has gone through many in the past.
So, in effect, actions by banks and others have left the nation in recession, with the public bailing them out, while taking on the effects to their economy; a double-whammy so to speak. As Krugman ends, punishing the Irish population for the mistakes of the banks and others is a terrible mistake. Other measures including temporary capital controls also helped. In the US, the Democracy Now! Some have contributes hundreds of millions of dollars to push Congress to cut Social Security, Medicare and Medicaid — while providing tax breaks for corporations and the wealthy.
Campaigns such as Fix the Debt are portrayed as a citizen-led effort, while critics find them to be fronts for business groups. And of course, special interests and ideology are at play as John Nicols, part of a group who exposed some of these findings, noted:. What they are really arguing for is a systematized austerity, one where you have very, very wealthy people deciding what sort of fixes we will have for our economy. And at the end of the day, invariably, the fix will be to lower their tax rates while at the same time taking deep cuts out of the earned benefit programs that Americans desperately need.
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In his own article in the Nation magazine John Nichols added. The Fix the Debt project, financed by corporations and billionaires, seeks to buy that influence after its proposals were rejected by the voters. In that article he also describes how some of the phony campaigns work in a 2-minute video:. As prominent economist Ha Joon Chang has written many times, the UK's problems go far deeper than the cuts agenda. British debate on economic policy is getting nowhere. The coalition government keeps repeating that it has to cut spending in order to cut deficits, no matter what.
The opposition has been at pains to explain … that trying to cut deficits by cutting spending in a stagnant economy is a largely self-defeating exercise, as it reduces growth and thus tax revenue. In reality, though, the coalition government isn't as stupid or stubborn as it appears.
It is sticking to its plan A because spending cuts are not about deficits but about rolling back the welfare state. So no amount of evidence is going to change its position on cuts. And history seems to show that austerity has never worked and has always led to recession. Or maybe put another way, it has typically worked for the elite looking to maintain a system from which they benefit. For UK in particular, as Chang continues, despite a huge devaluation in the sterling currency, it has still been unable to generate a trade surplus.
And as manufacturing shows mixed signals, luxury goods show a general healthy sign and exports of raw resources are doing better than finished manufacturing products, these all hint to growing inequality and potential growing poverty and stagnation.
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Or as Chang puts it, putting all this in context, since the crisis the British economy has been moving backwards in terms of its sophistication as a producer. In the middle of , the United Nations also warned that the problems in European were bad not just for Europe, but for the world economy too. The policy of austerity was criticized by the UN as heading in the wrong direction.
The fiscal austerity programs implemented in several European countries are ineffective to help the economy emerge from crisis, it said, according to Inter Press Service. A few are now suggesting that some European countries may be facing a lost decade or a lost youth generation. A Nobel laureate in economics, Joseph Stiglitz, writes,. The problem is that the prescriptions imposed are leading to massive under-utilisation of these resources.
Whatever Europe's problem, a response that entails waste on this scale cannot be the solution. While many talk of a lost decade, it is worth remembering that similar austerity programs imposed on most of the developing world in the form of Structural Adjustment Programs amounted to a loss of 2 decades. Given … recent [reform] changes in the IMF, it is ironic to see the European governments inflicting an old-IMF-style program on their own populations. It is one thing to tell the citizens of some faraway country to go to hell but it is another to do the same to your own citizens, who are supposedly your ultimate sovereigns.
Indeed, the European governments are out-IMF-ing the IMF in its austerity drive so much that now the fund itself frequently issues the warning that Europe is going too far, too fast. Democracy is neutered in the process and the protests against the cuts are dismissed. The description of the externally imposed Greek and Italian governments as technocratic is the ultimate proof of the attempt to make the radical rewriting of the social contract more acceptable by pretending that it isn't really a political change.
The danger is not only that these austerity measures are killing the European economies but also that they threaten the very legitimacy of European democracies — not just directly by threatening the livelihoods of so many people and pushing the economy into a downward spiral, but also indirectly by undermining the legitimacy of the political system through this backdoor rewriting of the social contract.
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It is not because people condoned defaulting per se that they came to introduce the corporate bankruptcy law. It was because they recognized that in the long run, creditors — and the broader economy, too — are likely to benefit more from reducing the debt burdens of companies in trouble, so that they can get a fresh start, than by letting them disintegrate in a disorderly way. It is high time that we applied the same principles to countries and introduced a sovereign bankruptcy law.
For the developing world, the rise in food prices as well as the knock-on effects from the financial instability and uncertainty in industrialized nations are having a compounding effect. High fuel costs, soaring commodity prices together with fears of global recession are worrying many developing country analysts.
Summarizing a United Nations Conference on Trade and Development report, the Third World Network notes the impacts the crisis could have around the world, especially on developing countries that are dependent on commodities for import or export:. Uncertainty and instability in international financial, currency and commodity markets, coupled with doubts about the direction of monetary policy in some major developed countries, are contributing to a gloomy outlook for the world economy and could present considerable risks for the developing world, the UN Conference on Trade and Development UNCTAD said Thursday.
Market liberalization and privatization in the commodity sector have not resulted in greater stability of international commodity prices. There is widespread dissatisfaction with the outcomes of unregulated financial and commodity markets, which fail to transmit reliable price signals for commodity producers. In recent years, the global economic policy environment seems to have become more favorable to fresh thinking about the need for multilateral actions against the negative impacts of large commodity price fluctuations on development and macroeconomic stability in the world economy.vecogtemost.ga
Where does your plastic go? Global investigation reveals America's dirty secret
Countries in Asia are increasingly worried about what is happening in the West. A number of nations urged the US to provide meaningful assurances and bailout packages for the US economy, as that would have a knock-on effect of reassuring foreign investors and helping ease concerns in other parts of the world. Many believed Asia was sufficiently decoupled from the Western financial systems.
Asia has not had a subprime mortgage crisis like many nations in the West have, for example.
Many Asian nations have witnessed rapid growth and wealth creation in recent years. This lead to enormous investment in Western countries.
In addition, there was increased foreign investment in Asia, mostly from the West. However, this crisis has shown that in an increasingly inter-connected world means there are always knock-on effects and as a result, Asia has had more exposure to problems stemming from the West. Many Asian countries have seen their stock markets suffer and currency values going on a downward trend. Asian products and services are also global, and a slowdown in wealthy countries means increased chances of a slowdown in Asia and the risk of job losses and associated problems such as social unrest.
Much of it is fueled by its domestic market.