How many more financial crises in the West can the world stand?

(Left/Right) Christine Lagarde, Director-General of the IMF; Angela Merkel, German Federal Chancellor and Angel Gurría, Secretary-General of the OECD. Berlin, Germany, 30 October 2012.

“After five years of crisis the world economy is weakening again”, states bluntly the very first phrase of the editorial of OECD’s latest economic report, published on 28 November. Actually it couldn’t be differently, because the US economy doesn’t seem to respond well to therapy and Europe is in a much worse state. But let’s take one thing at a time.

The West

To avoid a recession the United States is now waiting for the Republicans to endorse the new Obama strategy, which is to feed the economy with more newly printed dollars. Unfortunately it is not only greenbacks that Mr Ben Bernanke, the governor of the American central bank, the Fed, prints. He also turns out freshly printed US bonds with nominal values in the region of hundreds of billions of dollars, leaving the rest of the world, mainly the Chinese, wondering if all that paper will worth anything after some years. Beijing, having accumulated more than two and a half trillion in dollar denominated US debt paper, is much keener to protect the honour and the value of the dollar than Washington.

On the other side of the Atlantic Ocean, the European Central Bank didn’t want to be left out of this paper money bonanza, so Mario Draghi, its governor embraced the same idea and started the printers. Only some months ago ECB offered one trillion fresh paper euros to almost all Eurozone banks, trustworthy or not. Everybody knows that only a handful, if any one at all, of Eurozone banks can be trusted with our savings. ECB’s print production though is much less than the Fed’s.

The US

This is so, not because the Europeans are more hesitant in such matters, but just because they don’t have six naval fleets around the world like the Americans, bombarding who ever does not accept the dollar and the dollar denominated bonds at face value. See what happens with Iran? If Tehran is finally bombarded the world will learn that the poor Iranians would have needed some  hundred years to come up with  real nuclear arms.

It will be a repetition of what happened in Iraq, when the stupid butcher, Saddam Hussein, started selling his oil in other currencies, excluding the dollar. What an unholy man, not believing in the green dollar and preferring the green colour of the Arab flags! That is why he had to meet his kismet.

To support their god given right to exploit the rest of the world (New York banks don’t discriminate, they exploit also the Americans), the US has another fighting fleet, this time of financial calibre, to back any dollar value. Those are the three mighty rating agencies, Standard & Poor’s, Moody’s and Fitch-IBCA. They rush to rate with three As (AAA) whatever the Fed printing machine produces, or the New York banks turn out or promote as debt paper or stocks.

Remember the dot.com crisis, with the entire world believing and paying good money for the rubbish, Bill Clinton himself was promoting? Then we had the great credit crunch of  2008, which still makes us all continue paying for the recapitalisation of US and Eurozone banks. Not to forget also that lately a lot of people were robbed, when caught in the Facebook stock issue. It seems that the US financial sector and the economy in general need every now and then a good wholesale crisis, to make everybody else pay for their sins.

European bankers and politicians, being jealous of their American counterparts, run to follow the US paradigm. They started applying the same principles. First they decided to save all and every bankrupt bank, with newly printed ECB’s money. Then came the bankrupt countries. Greece is again the first to be saved with paper money and pen guarantees.

Paper values V real products

As it is obvious the US and to a lesser degree Eurozone, live on paper money and debt issues. At the same time the production of real things has emigrated to the developing world. The west keeps expanding its already huge services sector, banks included, to offer jobs and incomes to its shrinking younger generations. This arrangement however cannot go on for ever. Sometime in the not so much distant future the working populations in Asia and South America will start asking why the world is so unfair to them. And then the globe will face some grave dilemmas…

OECD’s report can be seen in this address: http://www.keepeek.com/Digital-Asset-Management/oecd/economics/oecd-economic-outlook-volume-2012-issue-2_eco_outlook-v2012-2-en

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