The North Korean economy is possibly not too badly affected by the international financial crisis, triggered by economic management in the United States.
At the world economic meeting in Davros, the BBC reports international bankers are keeping out sight, and China and Russia are laying much of the blame on the United States. Steve Schifferes notes the opinion expressed by Chinese Premier, Wen Jiabao:
Among the causes of the crisis, he cited “inappropriate macro-economic policies of some economies and their unsustainable model of development” – a clear swipe at the low savings and high consumption rate of the US economy – and “the failure of financial supervision and regulation”.
He also blamed the banks for their “blind pursuit of profit” and a “lack of self-discipline” which have landed the world economy “in the most difficult situation since the Great Depression”.
Further criticism came from Russia’s Prime Minister Vladimir Putin, who said that “poor quality regulation” led to “the collapses of the existing financial system”.
Mr Putin also criticised the world’s dependence on the dollar.
“Excessive dependence on what is basically the only reserve currency is dangerous for the world economy,” he said.He said that the result was “a serious malfunction in the very system of global economic growth” and that “whole regions of the world, including Europe, found themselves at the periphery of global economic processes” and “were outside the framework of the key economic and financial decisions”.
And he argued that the benefits of the boom “were distributed very disproportionately” both within countries and between them.
Economic crisis is hitting economies around the globe, it seems in proportion to their exposure to financial deregulation. For example, Sean O’Grady in The Independent observes that:
The mega problem comes when the markets decide that the UK government cannot shoulder all the debts – especially the banks’ foreign currency liabilities – it is now trying to shoulder.
The possibility that Her Majesty’s Treasury might be unable to meet its obligations is a remote one but it can no longer be dismissed.
Iceland turned out to be particularly vulnerable, and is not out there riding free in the North Atlantic anymore. The economic mood has changed. Iceland’s currency collapsed in October, and now the Central Bank has set its lending rate at 18%, and not unexpectedly unemployment is increasing rapidly.
By contrast with a larger population, and high dependence on international trade, New Zealand’s Reserve Bank cut the cash rate (broadly defined as the overnight market money interest rate between banks) to 3.5%, the lowest for ten years. Faced with the prospect of a six quarter recession, the Governor of the Reserve Bank observed in part that “desperate times call desperate measures”.
In the United States, the massive Treasury and tax payer payments to the Banks have been supposed to re-establish financial confidence in the lending markets. If the banks do not trust each other, they are hardly likely to have a positive attitude to other investment. The lack of accountability has ruffled a few hairstyles.
As in foreign affairs, the baton was dropped by the old Administration and left to the new Obama Administration to pick up. Press TV asked Noam Chomsky how he expects the Administration to handle the financial crises. He replied, via Counterpunch:
Nobody really knows. What is happening with the economy is not well understood. It is based on extremely opaque financial manipulations, which are quite hard to decode. I mean, the general process is understood, but whether the $800 billion, or probably larger government stimulus, will overcome this crisis, is not known.
The first $350 billion have already been spent — that is the so-called part bailout but that went into the pockets of banks. They were supposed to start lending freely, but they just decided not to do it. They would rather enrich themselves, restore their own capital, and take over other banks — mergers and acquisition and so on. Whether the next stimulus will have an effect depends very much on how it is handled, whether it is monitored, so that it is used for constructive purposes. [It relies] also on factors that are just not known, like how deep this crisis is going to be.
It just seems like Wall Street is looking after Wall Street. While Chomsky is not an economist, he is a long time observer of international affairs and he pertinently observes (something I had missed, anyway):
It is a worldwide crisis and it is very serious. It is striking that the ways that Western countries are approaching the crisis [entirely contradict] the model that they enforce on the Third World when there is a crisis. So when Indonesia has a crisis, [or] Argentina and everyone else, they are supposed to raise interest rates very high and privatize the economy, and cut down on public spending, measures like that. In the West, it is the exact opposite: lower interest rates to zero, move towards nationalization if necessary, pour money into the economy, have huge debts. That is exactly the opposite of how the Third World is supposed to pay off its debts. That this seems to pass without comment is remarkable.
Of course, Chomsky does not really believe that it is remarkable. He knows better than that, and it is probably time for many more people to be equally aware of the way the international game is played.
DISCLAIMER:
Please note, I know very little, if anything, about economics. For example, I had to look up to find out what the cash rate was.