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Thursday, March 19, 2009

Scary Piece in the Asia Times

Some excerpts:
DOLLAR CRISIS IN THE MAKING, Part 1

Before the stampede
By W Joseph Stroupe

Increasingly ominous clouds are gathering in what could soon be the perfect storm against the United States dollar and against the present dollar-centric global financial order.

This is not shaping up to be a storm that anyone is trying to initiate, not even those who are actively driving for a new global financial order that is no longer centered on the dollar. Instead, it will result from a correlation of forces arising out of the deepening global financial and economic crises, coupled with recurring and conspicuous miscalculation on the part of some of the world's political, financial and economic leaders.

[]

Unfortunately, we cannot be confident that world leaders know what they are doing in seeking to resolve the crisis. Are their measures attacking the heart of the problem, or only its periphery? Are they exacerbating the crisis, either by enacting certain misdirected measures, or by failing to enact certain required measures? Are they setting up conditions that make a dollar crisis and radically increased financial upheaval virtually inevitable, by blindly pushing ahead with a simplistic agenda of trying to spend their way out of the present crisis?
The one-two punch:
Empty reassurances

Remember when the present crisis broke in 2007, the reassurances that it would not spread beyond the confines of subprime; when it did spread, the forecasts that Wall Street banks' losses would amount only to a total of about US$200 billion. Remember when "experts" insisted no widespread credit crunch would result. Remember when they insisted that the crisis was unlikely to spread from Wall Street to the real economy on Main Street?

Remember when they said the hundreds of billions of dollars of liquidity thrown into the system would free up the credit seizure. Remember when they said the October 3, 2008, $700 billion stimulus package and the many more hundreds of billions of dollars in bank and corporate bailouts would move the system out of crisis. Where are all these pseudo-intellectual ideas, beliefs, ideologies, assessments and assurances now? On the trash heap, precisely where they belonged in the first place.

The record inspires little confidence in the ongoing efforts of governments to resolve the crisis, or even that they know how to resolve it. The damage and outright destruction inflicted on vital components of the present global investment, finance and economic orders just keeps piling up while governments keep trying their various "solutions".
Read it all. While I tend to eschew gloom and doom prophecies, this one seems to have credibility because its author, W. Joseph Stroupe, seems careful not to exaggerate the present conditions that could lead to the future crisis. While he scrupulously avoids naming names, it is obvious that he directs a great deal of his concern toward Washington.

This country has experienced many financial crises in the past and has always emerged from them, eventually, whole. What scares me about the present morass is never in our history have we faced a crisis where there has been such a paucity of adult leadership (there is at least one grown-up in the Obama administration, Paul Volker, but no one pays him the slightest attention; look for him to quit). If indeed a there is worldwide panic, I can only foresee Obama, Geithner, Summers, Pelosi, Reade and the rest of our puerile leadership panicking along with the rest.
(h/t For What It's Worth)

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