Voices from Russia

Thursday, 16 October 2008

Europe Takes the Lead in the Anti-Crisis Drive

This October has seen the greatest number of extraordinary financial summits in a long time, with a frequency and scale proportionate to the size of the current financial crisis. The drive began with an emergency gathering of Germany, France, Italy, and Great Britain in Paris on the first weekend of October, went on to an emergency summit of the 15 nations of Europe’s single-currency zone plus Britain (which is not part of the Euro area) on 12 October, and will continue as the European Union countries will gather for a general extraordinary summit in Brussels on 14-15 October, whilst the Group of Eight will meet in Japan on 24-25 October. There was also a G7 meeting of finance ministers in Washington (Russia’s Aleksei Kudrin was present although Russia is not part of G7), as well as an annual meeting of the International Monetary Fund and World Bank shareholders.

Those accountants endowed with ministerial portfolios are having a hard time now, having failed to realise that banks no longer followed financial laws, but, used some tacit rules of their own to guide their operation, that a global crisis was imminent and that governments had to interfere. President George W. Bush must be having the hardest time of all now that he has been nearly thrown off the global stage. Italian Prime Minister Silvio Berlusconi described how it happened. As we know, Mr Bush proposed an extraordinary G8 summit in Wa­shington on 14 October. Signor Berlusconi said the date and place were basically okay. But, according to him, Nicholas Sarkozy asked him to wait and see what will happen and what still may need to be done. Diplomats and politicians usually speak in codes, and this code as used by the French president meant, “This is something we do not want or need”. Instead of Washington, the G8 will now head for Japan, which is now driving itself into the ground preparing for the summit. The top G8 officials will reportedly be meeting somewhere close to Tokyo’s Narita Airport, for it is convenient to fly in, quickly discuss things, and fly home.

It was unthinkable a few weeks ago that the United States could be kept almost out of the quest for solutions to the global financial crisis. But, this crisis is different. It originated in the United States which allowed the virus to escape thereby contaminating other parts of the world. Europe didn’t seem to want to go to the crisis epicentre. The Times, perhaps, offered the best explanation of the situation. “Aghast at the dithering incompetence of the US in handling this crisis, European politicians have realized that Henry Paulson, the supposedly brilliant US Treasury Sec­retary, was an emperor with no clothes. Instead of waiting for US leadership, they had to take responsibility for Europe’s problems”. The 15 Euro-zone leaders roughly outlined their responsibility at their emergency Paris summit. That summit was the first one of its kind since the introduction of the euro in the early 1990s, which is indirect evidence that matters are really getting out of control.

The solutions they worked out are like a tool kit with a do-it-yourself manual. In fact, this is quite reasonable because although most countries have the same symptoms of the crisis, they vary in intensity from catastrophic in Britain (the author of the Anglo-American model of bank liberalism) to moderate in Spain. Each country may pick the tools it needs from the kit and use them to respond to their particular situation. All they have to do is read the manual which contains 13 instructions. The key steps are fairly simple.

  • temporarily guarantee bank refinancing and interbank loans
  • guarantee “for an interim period and on appropriate commercial terms” new debts caused by bank lending during the next five years
  • rescue important failing banks through emergency recapitalisation

The scheme will be applied through 31 December 2009. By following these guidelines and using uniform tools, Europe seems able to rescue its banking sector, to ease tightened financial markets, and get credit flowing again. Although they aren’t yet anywhere near establishing a pan-European financial fund to rescue banks as proposed by Nicolas Sarkozy, they’ve come a long way from leaving everyone to try and keep afloat as best they can, as German Chancellor Angela Merkel suggested.

There was no sum given on how much the EU measures would cost; each country will decide how much it will spend, and individual governments will announce this at the Brussels meeting on 14-15 October. But, the amounts will obviously be enormous, and probably close to, or in excess of, Henry Paulson’s 700 billion dollar (18.407 trillion roubles. 518.14 billion euros. 403.48 billion UK pounds) bailout. Germany alone is said to be willing to allocate 400 billion euros (14.21 trillion roubles. 540.395 billion USD. 311.483 billion UK pounds) to save its banks, and even Portugal will provide 20 billion euros (710.535 billion roubles. 27.02 billion USD. 15.574 billion UK pounds) to support its banks. Whatever the specific amounts, is it clear now that many taxpayers will eventually find themselves the co-owners of some of Europe’s private banks. Even at 10 Downing Street, they no longer hiss at the word “nationalisation” through gritted teeth. Even officials in London realise that large-scale nationalisation will become unavoidable if their plans to inject cash and buy failed assets from banks work too slowly or don’t work at all.

16 October 2008

Andrei Fedyashin

Moscow News



Capitalism Gets Ugly

Filed under: business,domestic life,economy,politics,Russian,USA — 01varvara @ 00.00

Having just run the gauntlet of the latest financial crash with the shirts still on our backs, albeit nicely wrinkled and sweat-stained, perhaps, it is an appropriate time to poke some fun at this icky little “ism” that wants to devour us all. And, now, ladies and gentlemen, the top five things Karl Marx never warned you about Capitalism:

5. Capitalism will never live up to its commercials. Capi­talism is a lot like those automobile commercials that feature a smiling stud behind the wheel, hot babe at his side, and not another car along Sunset Boulevard for as far as the eye can see. In reality, Capita­lism is an eternal one-lane traffic jam, a never-ending treadmill, with everybody clamouring for the promised passing lane; the system’s rigged that way. I have one vivid image of the present crisis that’s going to be difficult to shake. Friends, family, and co-workers loading up on foodstuffs, pasta, canned corn, beans, salt, even matches, in order to survive a few extra weeks should the financial house of cards come tumbling down on our heads. Perhaps, you know very intelligent people too who are suddenly talking about buying some farmland in the countryside “just in case”. Eventually, I came to the conclusion that they’re on to something. Think about it. You wake up one sunny morning, walk to the local hypermarket (is it just me, or is “hypermarket” one of the ugliest words in the English vernacular?), and there’s a chain across the doors with a sign that reads, “Sorry, Folks, Closed Due to Crisis”.  Personally, I find this more than a little disturbing. So, where exactly is the “free” in this market? What Capitalism giveth, Capitalism taketh away.

4. Environmental Apoca­lypse Now. I won’t beat this dead dog too long, because, by now, we’re all pretty sick and tired of hearing about the “dying planet”. Yes, the glaciers in this big cocktail called Earth are melting, the weather’s gone berserk, and professional golfers are appearing in Iceland. My God, the end really is near. Nevertheless, here’s the dry irony of the whole impending catastrophe. The inhabitants of the third rock from the Sun are shaking in their boots because the man-made financial markets are spiralling out of control, yet, daily, we accept with cool indifference the Yahoo! News that the very life support system of our planet is collapsing due to our reckless financial markets. Go figure.

3. The People are Mise­rable. Here’s a nice bit of twisted Logic to ponder.

  • Our happiness, the economists tell us, is directly proportionate to the amount of things we consume.
  • Americans consume more than any other people on the planet.
  • Therefore, Americans must be the happiest damn people on the planet.


According to a recent article in the Washington Post, one of the most popular products amongst “happy” Ameri­cans is anti-depressant medication. “One in 10 women takes an anti-depressant drug such as Prozac, Paxil, or Zoloft, and the use of such drugs by all adults has nearly tripled in the last decade”, according to data from the FDA. Incredibly, even the kids are lining up for their happy pills. “The number of children getting psychiatric drugs… soared. In 2002, about 6 percent of all boys and girls were taking antidepressants, triple the rate in the period 1994-96”. Nationwide, the figures are at epidemic rates. “Overall, 44 percent of all Ame­ricans, including children, were taking at least one prescription drug in 1999-2000, a 5 percent increase since 1994”. So, where are the happiest people on Earth? Yes, Denmark. Should we chalk it up as mere coincidence that its government officials, according to the nation’s happy website, “exercise considerable regulatory control and provide comprehensive services for the citizens?” Maybe…

2. Warped Democracy. In the West, the evil corporations own everything, even the political system. Have you ever heard of the Commission on Presidential Deba­tes, CPD for short? Well, it’s time you had, because this corporation has been regulating and sponsoring the US presidential debates since 1987, when the League of Women Voters mysteriously surrendered their duties. Incidentally, it was the Democrats and Republicans who initiated this little Beltway Brother­hood of the Ballot. This corporation de facto determines who gets to participate in the debates “as determined by five selected national opinion polling organisations”. They use this data to determine if a candidate has a chance of attracting 15 percent of the vote. If these polling organisations say “no”, ba­sed on their criteria, the CPD duly rejects the candidates [Forbes, Perot, Nader, etc.] from debating with the Dems and Reps. Maybe the corporate-owned media will expose such contradictions? No, Mr Murdoch has better things to invest his time in.

1. Capitalism is dead, long live Capitalism. The latest crisis, which has governments scrambling to pump up their financial institutions, which collapsed due to the latter’s sheer greed, has reinforced the belief that “socialism is for the rich, capitalism for the poor”. Actually, I truly believe that Capi­talism is the best system we can hope for. It unleashes the highest capabilities of the people; it organises development far more methodically than other systems; it is guided by the wisdom of the “invisible hand” of the market, which, although imperfect, does tend to be an accurate guide and compass. However, can we honestly call what we’ve come to inherit, with massive corporate enterprises [read: Wal-Mart and McDonald’s] dotting our local communities, genuine capitalism? Even Adam Smith would shriek in horror at what passes for “fair competition” today. I say, bring back the local butcher, the local pharmacy, the local shoe store, the local retailer, the local hardware store, the local restaurant, the local theatre, etc., etc., and, then, we can talk about the “Crisis of Capitalism”, at least with a straight face.

16 October 2008

Robert Bridge

An American in Moscow

Moscow News


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