The Short End of the Global Economy
Posted in Public Affairs, Money Matters, wordpress, disclosure, ethics, oversight, United States, China, Chrysler, Foreign Affairs, Australia, Japan on September 18th, 2008 by Stanford Matthews 
While the payback for the greed in the subprime market continues to punish US financial markets and some of the perpetrators’ businesses, co-conspirators around the world are experiencing a similar fate. While liberal politicians in America love to criticize the Bush Administration for what they call failed policies including China’s practice of holding America’s debt, Asian financials are beginning to bleed just like those in the US. On news of money troubles in the US, markets in China, Japan, Korea, Australia and elsewhere across the region are duplicating stock market losses on Wall Street.
The market in China lost 7% after the American taxpayer bailed out AIG and it lost more than 15% in the previous two sessions. As much as other countries enjoy bad mouthing the US when it comes to finance and greed nations of the world share this common bond of human vulnerability. Markets in Japan, South Korea and Australia lost between 3 and 4% mimicing US losses that exceeded 4%. As far as credit markets are concerned, if those comparing current money woes to the Great Depression look around they will find the entire planet poised to take a beating on past and current practice in investing and lack of discipline.
As the US Fed punishes Lehman but props up Bear, Fannie, Freddie and AIG, Japan and Australia injected billions into the money markets while Chinese money pundits claim their is liquidity available. Now that one of the usual suspects in the subprime scandal puts itself up for sale, WAMU is being looked at by the likes of Citigroup and others who have had their own problems with holding too much bad paper. So much for those predicting the bottom of the financial crisis across the planet. Even though the US has weathered similar predicaments in the past and calls for measures duplicating the response to the S&L debacle of the eighties abound the common concern finds the growing panic focused on how bad, how long and what will this do to me.
One sensible approach suggested in current reports was the need for ailing banks to merge in an effort to shore up weak balance sheets. Misery may love company but the wisdom of this strategy still requires all players to abandon excesses of taking on unlimited risk and returning to practices that resemble the Puritan ethic of hard work and discipline as well as the old fashioned notion of simply doing what’s right. The odds seem very long on that probability.
Bank of America and Barclay’s withdrew interest in aiding the AIG bailout when the Fed refused to guarantee them against failure. But no one seems to mind risking the American taxpayer’s money in times like these. The classic example of Lee Iacocca and Chrysler being balied out by the Fed in the late seventies and eighties cites everything worked out and no one lost. It’s a nice fairy tale but according to the Heritage Foundation, ‘ And so is the myth of the Great Chrysler Comeback of the once dying automaker has become the favorite example cited by proponents of national industrial policy who call for massive and costly federal efforts to revive what they describe as a des perately ailing American economy.’ Sham stock certificates were eaten by holders of record, creditors took losses just like a normal bankruptcy, thousands of workers were laid off and in general the bailout was not a bailout or the perfect story often reported. This may be part of the public opinion guide to be used by observers of the current strategy of government intervention supported as usual by taxpayer funding.
As for the millions facing foreclosure some of the homeowners may not be of the speculator variety. Not that it si possible or even advisable in all cases but there seems to be some wisdom in attempting to right the ship of many borrowers and allowing the chance to repay debt even in the shadow of recent defaults. Besides, 
the typical scenario of liquidating foreclosed properties to the vultures in waiting may only exacerbate an already tenuous mirage of a remedy. As REOs are unloaded at auction real estate prices of the surrounding properties may also take a hit placing more pressure on falling home prices. The properties as collateral for outstanding mortgages on the remaining stock of homes across the nation are then at least changed in loan to value ratios causing more problems for the banking industry.
But with banks hoarding cash in an attempt to weather the storm finding sources for restructuring home mortgages may just be a pipe dream So like the FED bailing out AIG, allowing the remaining problems to sort themselves out or offering government assistance in the form of taxpayer subsidies or guarantees really offers no insight into how this whole mess will play out. But it would not be a surprise if all the little guys get crushed by the outcome while fat cats like the CEOs and their golden parachutes skate the justice of paying for their sins. Life’s not fair and whatever the final verdict there will be plenty of casualties and plenty of examples of those who were enriched at other’s expense. Maybe more a case of survival of the most sinister rather than the fittest and the whole thing will take longer than we would like to play out.
Stanford Matthews
MoreWhat.com
Australia’s new left-of-center Labor government says it will review a controversial citizenship test. Some people are critical of the test’s high rate of failure by applicants, who are quizzed about Australian history, culture and political system. From Sydney, Phil Mercer reports.
If the previous post does not show you that Senator Harry Reid is a contradction then understand he said they would not cut and run in Iraq or raise taxes. Right at the moment the tax thing is secondary. He said they would not cut and run. Senator Reid would you kindly explain the report below if you are not planning on cut and run?
