Busted: Bankers and The Global Economy

October 30, 2008

Economic Hurricane Ravages Globe

U.S. economic contraction is in the news again as quarterly statistics pour in. Central bankers in economies across the world are cutting interest rates in the vain hope of sustaining banking rates for lending. While the United States is reporting the sharpest economic contraction in seven years, this statement is likely quoted to throw you off the economic trail that this is the worst economic fallout in a century. Why? It makes no sense to quote such a fact when the rest of the world is reeling with fear and trepidation with a full factual account. We are still on the front side of the hurricane as it comes into shore.

U.S. business collateral damage is being reported as U.S. citizen bail out of making major purchases and cut back on spending in an effort to avoid the plight of shrinking prosperity. Business have been hit hard by consumer cutbacks and lack of credit. Huge job losses have the nation staggering as confidence wanes. The talk of fiscal stimulus is in the air, now a constant topic in U.S. Congressional hearings. Strangely, many bankers, notably on Wall Street are still trying to issue bonuses to commissioned employees despite record losses and major taxpayer bailouts.

One bright light in the eyes of many is huge cash infusion and enlargement of central banking swap lines. This is seen as relieving the stress of frozen interbank lending even though this has not been thoroughly proved. U.S. bankers of any size have been notoriously resistant to anything but their own interests as they seek government guarantees for every aspect of their businesses. The other down side is the deflationary havoc that this will ultimately play on the dollar in the long term. However, short-term stability is main concern of most parties across the globe.

The International Monetary Fund has become the latest scorekeeping organization for tracking the plight of foreign and emerging economies in crisis. In any event, the news is overwhelmingly bad. While the news is mostly bad, it isn’t bad for everyone. Economic damage from the recession has slowed global growth, but has strengthened the dollar, allowing for a temporary export blitz for many capital goods like in the aviation industry. This temporary bonus can’t last, but is the lone bright spot in business on the U.S. horizon. The United States has once again become a global store house for many investors that need the feeling of safety.

The world certainly isn’t over, but Americans and other economies are going to have to reduce their expectations and living standards for some time while everyone waits for the cyclical upturn. Unfortunately, we are still seeing downturns in most markets, notably in the housing industry as nearly 2700 homes are day are foreclosed by U.S. bankers. This is putting a huge strain on the housing market and the U.S. economy. For the first time in history, the U.S. government has seen fit to bail out everyone but the American people. In the past, the American people were the ONLY recipients of U.S. economic bailouts.

The banking criminals that brought this debacle about are hanging in the dark shadows, hoping that the massive crisis will render them bulletproof as far as criminal prosecution is concerned. Unfortunately, ignorance continues to rear its ugly head. Government, business and the people are so overwhelmed, they really can’t see the forest for the trees. Whether the nation has the will to punish for past conduct as well as protect against future conduct of abusive practices remains to be seen. It is clear that the world cannot afford another financial debacle like this again. Politicians are looking to the upcoming Summit for answers and ideas. Have no doubt that security is on the minds of most politicians and global citizens. Decisions will be made with that in mind.
~ E. Manning

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