Ed Weick wrote,
>It is probable that the crisis is far from over. The situation we have now
is one in which economies are not functioning well, investors are confused,
and everyone is waiting for the other shoe to drop. And there is an anxiety
abroad that it may be a very big shoe.
Everyone can stop waiting for the other shoe to drop. The other shoe dropped
first. Nobody heard it because there was so much noise from the party
upstairs. The ready (and unquestioning) availability of foreign credit to
emerging Asian economies was in large part due to the lack of opportunities
for comparatively high return on investment in the west.
It sounds paradoxical, but fast growth in the emerging economies of Asia was
fueled by slow growth in the mature economies of North America, Europe and
Japan. The fast growing emerging economies then acted as global engines of
growth, even shoring up sluggish growth in the mature economies.
In North America, the other shoe was the partial dismantling of the
Keynesian welfare state and the decline in earnings of the lower two fifths
of households. Although these have had devastating impacts on the
individuals affected, the macro-economic consequences have been masked by an
increasing reliance on export-led growth.
We heard the mantra over and over: "compete in the global economy, compete
in the global economy, compete in the global economy." Now note the subtle
shift to emphasizing the inherent strength of the domestic U.S. economy as a
bulwark against global turmoil. It won't wash.
The bankers and finance ministers killed the goose that laid the golden egg.
They murmured 'fiscal rectitude' and coddled speculative excess. There they
sit with goose-grease dripping from their chins wondering how they can
squeeze a few more from the ravaged carcass on the table.
Soup, anyone?
Regards,
Tom Walker
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