A newsstand in London on Oct. 13 reflects the financial crisis. (AP)
The U.S. is widely criticized in the financial crisis
COMMENTARY | October 14, 2008
The Overseas Press: A Japanese official says, “We made a mess of solving our banking crisis in the 1990s…Washington carefully studied what we did and made a bigger mess.” And in Tehran, there is some gloating.
By Lauren Drablier
PARIS—News concerning the financial crisis has taken over newspapers and Internet pages around the world and the international media have been quick to say a geopolitical power shift is taking place. Some predict the end of U.S. hegemony and the rise of a ‘new multi-polar global economic order,’ according to the Tehran Times.
Some national papers focus mainly on the local effects of the financial crisis but critiqued the United States for being the cause of the crisis and for still being unable to resolve it.
A lot of attention has been concentrated on emerging economies and the question remains to what their position will be; whether they can help ease the burden, or if they will be hit just as hard as the US and Europe.
In ‘World Bank chief economist says China could weather through financial crisis,’ Xinhua focuses on how the financial crisis will affect China:
“World Bank Chief Economist Justin Lin said on Saturday that China could work through the current financial crisis, the most serious since the Great Depression in the 1930s.
"However, China may be able to weather through this crisis in a much better shape than many other developing countries," said Lin, a leading Chinese economist who was named as the chief economist and senior vice president for Development Economics at the World Bank in February.
“Lin said his confidence comes from three reasons. "First, China has such large foreign reserves; and secondly, China has capital controls, so China in a way can insulate itself by building a firewall against the contagion," he said.
In ‘Signs of a 'nonpolar' world emerging amid financial crisis’ Japan’s Ashai Shimbun paints a dark picture for the US and also predicts a geopolitical power shift towards the east:
“The American people will no longer be able to enjoy consumption patterns well in excess of their incomes that were made possible by an expanding credit line.
“It will become increasingly difficult for the United States to sustain its current account deficit--disparagingly referred to as a "deficit without tears"--by simply printing more dollars.
“Bank of Japan Governor Masaaki Shirakawa warned, "The liquidity of the dollar is now in a situation of near exhaustion."
“The situation is so grave that the U.S. government may have to take action to rescue the automobile industry.
“Although then U.S. President Ronald Reagan caused the eventual collapse of the Soviet Union and its communist ideology in the late 1980s, the United States 20 years later now faces both a quagmire in Iraq and Afghanistan--and the collapse of Reaganomics.
“The financial crisis triggered in the United States has inadvertently revealed that the world may have entered into a ‘nonpolar’ era brought on by both globalization and the accompanying weakening of nations' control functions.
“The Western media has played up a ‘Japan-is-back’ image.
“There had been signs of a geopolitical power shift from the West to Asia. The financial crisis and economic stagnation in the West will accelerate that trend.”
Pakistan’s Dawn highlights the shift in the global economic power balance in ‘Financial meltdown dissected’:
“The year 2008 may go down in history as the year in which the Anglo-Saxon financial model collapsed and global economic power shifted from the West to the East.
“Asian stock markets have not been immune to the crisis and have fallen sharply reflecting slower growth forecasts. However, according to the IMF, the Chinese economy is still likely to grow by 9.3 per cent, Russia’s by 5.5 per cent and India’s by 6.9 per cent.
“Japan and China are the two largest foreign creditors of the US: Japan holds $593bn of US treasury bills, followed by China with $519bn. The US is now completely dependent on Asia for financing its losses and deficits and hugely dependent on the Middle East and Venezuela for meeting its oil needs.
“The shift in the global economic power balance, once a matter of long-term projections, has been dramatically accelerated by what has been described as the fall of Anglo-Saxon financial capitalism as we knew it for a long time.”
In ‘Easy credit and financial crisis’ the Times of Malta draws attention to the dominance the US has had over the markets. The Times also explores what the crisis means for Europe and especially for Malta and urges for tighter regulation on credit and loans:
“More often than not America holds they key to financial stability (and thereby instability) around the world.
“It is said that when America sneezes the rest of the world catches a cold.
“We can see these repercussions around us as famous banking and insurance institutions around the world, including those in Europe, are reeling under the effects of the tidal wave coming from America with governments coming out of the cold to rescue them with huge bailouts.
“EU countries which up to a few months ago were being cited for their impressive economic performances are on the verge of a recession - notable amongst these being Ireland and Spain.
“Here in Malta we are being told that all these global happenings will have a moderate effect on us and that our economy is resilient enough to withstand such rebuffs.
“Have not our banks made it too easy for anyone to obtain a whole range of loans from a bank with too few strings attached to them and too little safeguards?
“Is it not time, therefore, for The Malta Financial Services Authority (MFSA) to look into the matter and ensure that sound financial systems are being applied before a financial crisis becomes a reality in this country also?”
The UK’s Telegraph focuses on international reactions and how European countries are dealing with the crisis in ‘Financial crisis: firemen look to douse the worldwide panic’. The Telegraph also provides an in-depth analysis of the weeks events and highlights China’s position:
“A Japanese official arrived tittering. “We made a mess of solving our banking crisis in the 1990s,” he said. “Washington carefully studied what we did and made a bigger mess.”
“…the Group of Seven communique put together by financial leaders was bolder than pessimists had forecast. But it stopped short of offering a convincing, coordinated, quantifiable plan, leaving markets once again to reopen this week in a state of tense uncertainty.
“Germany and France balked at joining the US in copying Britain’s plan to invest directly in banks as a way of easing their debt burdens.
“Any hope of region-wide co-ordination was overtaken by the unilateral actions of Ireland, Iceland, Greece and Germany to save their banking systems.
“Andrew Smithers of London consultancy Smithers & Co, predicts the stock market will continue to fall this week. But, he says, shares have been overvalued for 20 years and they should fall.
“The stock market falls may be an advance signal that we’re heading into recession,” said Liberal Democrat shadow chancellor Vince Cable. “But in contrast to what happened in the 1930s, Asian growth is holding up and we have not seen economic nationalism. As long as these two things hold, I think we’ll be all right.”
“It is the distortion in trade and financial flows between the US and China that lies at the root of the current financial panic, bankers say.
“The West sought to sustain an unsustainable standard of living by going ever deeper into debt, according to Sir Steve Robson, a former Treasury official and non-executive director in the City.
“Robson sees the collapse of the banking system under a mountain of debt as a symptom not the cause of what is going on.
“Any ultimate resolution of the financial crisis, he believes, must involve a rebalancing of trade and financial flows between the world’s ageing and emerging superpowers.
“Dominique Moisi, founder of France’s Institute for International Relations, goes a step further. “It may turn out that when the dust finally settles on the financial crisis, the most important aspect of its resolution may be what China did not do,” he said. In the face of panic “it did not sell its dollar reserves”.
In ‘The biggest bet in the world’ the UK’s The Guardian criticizes US leadership, the shifting focus of the IMF and World Bank, and the increasing power of emerging economies:
“The President has repeated his mantra that if they work together, the West's biggest economies would get through the crisis. For the first time since the turmoil entered a new and dangerous phase, Bush's remarks did not send share prices tumbling - but only because the market was closed for the weekend.
“For 50 years, America has been the global economy's uncontested superpower, preaching open markets, financial liberalization and free trade. Washington confidently believed it had the answer to the world's economic problems, if only the unconverted would listen. But last week showed that the US has no magic recipe to assuage the violent fear that had seized Wall Street, let alone offer a blueprint for other governments to follow.
“For the past decade, World Bank and IMF meetings have been dominated by the problems of the world's poorest countries. … belief that the only real issue was how to help poverty-stricken countries in Africa catch up. This year, the mood had changed: Africa barely merited a mention, as the West concentrated exclusively on preventing its home-grown crisis dragging the entire world into a slump.
“The IMF said the world economy had been allowed to run above its 'speed limit' for too long.
“Iceland may yet be forced to turn to the IMF for an emergency loan, but the fact that it was given direct financial support first by the Russian government underlines the power that countries which have built up huge financial surpluses - including Russia, but also China and many Middle Eastern economies - could wield in the years ahead.”
The Australian discusses the financial effects on Australia and also highlights how panic is driving the crisis and failure of US leadership in ‘Panic wreaks havoc’:
“The truth is that Australia's fate is beyond its hands. It is being decided in financial systems offshore and in the wisdom of the Group of Seven ministers and central bankers. The issue now is how far and how long the loss of global confidence extends. The issue for Australia is whether the irrational contagion can be contained before it smashes our defenses.
“Achieving this depends on the meeting of G7 ministers in Washington this weekend producing a new, credible action plan that halts the stampede. The G7's track record is unimpressive. But collapsing stock markets on Friday affirm the urgency for coordinated and dramatic action. The global downturn, if sufficiently severe, will drive Australia into recession despite all our strengths.
“The feature of the crisis is now panic.
“The failure of US leadership and governance is without precedent for nearly 80 years. The ignominious lesson bequeathed by the Bush administration is the world cannot function properly with such US ineptitude. The upshot, surely, will be a decisive victory for Barack Obama in the presidential election and the demise of this dismal Republican era.”
As the title states, ‘Centre of the financial universe could soon be shifting east’, Canada’s Globe and Mail discusses what the current financial crisis means for emerging economies:
“Seeking to profit from the U.S. credit crisis, other capitals of finance such as Shanghai, Singapore, Hong Kong, Mumbai and Dubai are bidding to usurp New York's status as the place to go to raise money, trade stocks or get financial advice.
“Wall Street's crisis could serve to quicken that evolution, moving financial power away from its old capitals in New York and London and shifting it to new hubs in Asia and the Middle East.
"A lot of parts of the world are going to start thinking, 'Hey, we're not that dependent on the U.S. any more. Ready or not, here we come.’
“Asian and Middle Eastern rivals, by contrast, find themselves in fighting shape. Flush with oil wealth or earnings from vast manufacturing exports, their central banks and government-controlled sovereign wealth funds control about $7-trillion (U.S.) in assets, 14 times the value of the major U.S. investment banks in their glory days.”
In ‘World Top Financiers Start Thinking Global’ the Middle East Times commended financial institutions for working together to try and come up with a solution but criticized politicians:
“At last the world's top finance officials, including those in China, have started thinking globally. This week's coordinated interest rate cuts suggest that the central banks are at last working together. Governments, legislatures and cartels have yet to learn the same lesson.
“Bahrain's Investcorp has launched a $1 billion fund to buy up cheaply the toxic loans and mortgages that cannot find a market, knowing that there are gems buried in that dung heap. It will help the U.S. economy if someone buys them up, and help Investcorp's investors when recovery comes and they show a profit.
“The question is whether the U.S. Congress and the European and Japanese parliaments understand this and stop making cheap political capital out of the cry that foreigners are buying the family jewels. Too many economic illiterates like Ohio Congresswoman Marcy Kaptur have blustered "Will we sit back and let the [sovereign wealth funds] of the world fire at will, claiming our assets and extirpating our businesses?"
“The ball is now in the court of Western governments and politicians. Can they coordinate their rescue policies as well as the central banks? Will they rout their own xenophobic populists and welcome foreign capital without offensive conditions? Are they ready to whatever it takes to save the system?”
Iran’s Tehran Times highlights the ‘incompetence of the Bush administration’, predicts an end to US hegemony and the rise of a ‘new multi-polar global economic order’ in ‘Twilight of U.S. economic supremacy?’:
“Many economists believe that Bush’s $700 billion bailout plan will be a short-term fix saving only banks and investment institutes but not benefiting ordinary people, although the final version of the rescue package does include points that are meant to resolve the financial problems of smaller businesses.
“If current trends continue, advances in emerging economies like China and structural problems in the U.S. economy will gradually lead to the twilight of U.S. economic hegemony.
“Russian Prime Minister Vladimir Putin said the crisis is the United States’ fault. European Commission spokesman Johannes Leitenberger said that the U.S. is directly responsible for the global economic crisis, while Banque de France Governor Christian Noyer said that French and European bank systems face numerous problems, adding, ‘In such a sensitive situation we must keep our calm and take measures to prevent the financial crisis from spreading to European countries.’
“Back in the U.S., ever growing numbers of citizens are coming to the realization that the incompetence of the Bush administration is the cause of the country’s economic and political bankruptcy, which is a view shared by supporters and opponents of the economic rescue plan.
“The events of the past few weeks show that in the near future, the United States will no longer be the economic superpower that it has been over the past 60 years and that a new multi-polar global economic order is taking shape.”
Finally, in ‘Next President Will Have To Deal With World Anger At US Over Financial Fallout’ Germany’s DW-World points to the political consequences in the US:
“Add another item to the list of world grievances with the United States the next president will have to deal with: Blame for the expanding global economic crisis.
“The Bush years, I learn anew every time I travel to another country and talk to people there, have made the rest of the world hostile toward America.
“And yet the fact remains: The next president is inheriting a world standing that has declined in recent weeks from the low, low point it was at, and that’s almost assuredly going to make it harder for the United States to call in favors even from its allies, be it on Afghanistan or any other foreign policy front.”
Lauren Drablier, based in Paris, has a masters degree in nternational affairs from Sciences Po Paris.
10/22/2008, 11:27 AM
Bank of America is ready to tumble and the run on the bank has already started.