Financial Crisis: has the world changed?

October 1, 2008

1929.jpgThere are moments when tectonic plates shift and history changes course.

Sometimes those shifts are barely perceptible — the Treaty of Versailles that ended World War One but also bred German resentment and the rise of Nazism; the Yalta conference that helped create the United Nations as a guardian of peace but also led to the Iron Curtain that divided Europe for nearly half a century; and the Great Depression (arguably the greatest catastrophe of the 20th century, says Martin Wolf).

It is only when we look back we see the world has changed.

Are we at such a point now? 

John Gray in The Observer speaks of a shattering moment in America’s fall from power. Germany’s Finance Minister Peer Steinbrueck has said the United States has lost its financial superpower status. French President Nicolas Sarkozy has said we need to rebuild the whole financial system from scratch, as they did at Bretton Woods. The Telegraph called for a ‘better capitalism’.

What of its status in other areas, of diplomacy, defence and its lead role in NATO? Can an inward looking United States commit to billions of dollars to rescue its financial system and at the same time commit ever more money to military operations in Iraq, Afghanistan, Africa and elsewhere?

There is a widely held view that September, 11, 2001 changed the world. Will the effects of 2008′s financial crisis prove even more profound?

10 comments

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How could the Yalta conference have led to the Great Depression when the Great Depression happened first ?

Posted by Jeffrey Tischler | Report as abusive

I hope, that bailout for $700 bln will be rejected. Congressmen were right to vote against it on Monday. Such action of Congressmen let us hope, that the american system is still more healthy, than ill. Such bailout is nothing more than lobby act in favour of stock & financial frauds. Officials from US Fed & Finance Ministry are to face investigation. They are blamed for non adecvate cutting/reducing Fed rates and lack of control of credit market. Fed rates are to be lifted and all bankrupts are to leave Wall Str., some of them to leave for prison. US fisical persons could be supported by government through many other ways.

From my understanding of history, part of Rome’s fall was the transfer of money from the military to the welfare state. The Soviet Union went broke paying the interest on the debts of the Satellite countries. It makes sense when you have too much debt the interest payments make it impossible to do anything else. Which is where the United States seems to be, or heading.
From what I have read, most of the jobs created in the past 10 years are described as Walmart jobs, meaning they pay barely over minimum wage. How were all these people supposed to afford home mortgages on these salaries?
However on the upswing, if the dollar declines to the point where importing goods costs more than making them here, manufacturing will return to the US. Manufacturing jobs have higher income and will more money will then circulate inside the local economy instead of going oversees. Generating more taxes and paying down our debt. It will be a painful transition and involve the price of imports becoming unaffordable for the average American. But after the shock and supply change catches up with local demand our country should be better of. 5-10 years is my guess, maybe sooner if the Business execs start believing the dollar isn’t going to rebound soon and begin making things here again.

Referring back to the 1st comment – the Great Depression is number 3 on the list of defining moments. The semi colon separates it from the previous 2 (ie no suggestion it resulted from Yalta)

Posted by janet mcbride | Report as abusive

9/11 had very little effect on the world at all – give or take a few wars (and who cares about them – live firing practice for the troops etc.). This crisis will have a much more profound effect. You won’t be able to base your credit card borrowing on whether you can pay the interest charges every month while you stay in a job and don’t drink too much, and you won’t be able to borrow five times your earnings to buy a prefabricated house. This isn’t a problem about bankers – it’s a problem about millions of “ordinary” people who are now in deep financial doo-doo. Geddit?

Posted by Matthew | Report as abusive

Of course we want to give away 700 thousand million dollar to raise our public debt to 11 million million to add to our 600 thousand million a year private debt, and let’s not forget the 600 thousand million to be overspent by the government next year which isn’t really the story because the government will steel more thousands of millions from social security. This crisis is nothing compared with the one that will occur when the US declares bankrupcy and defaults on it’s debts –This may be coming sooner than we thought–when’s a question–that it’s coming is not!!

Posted by Lowell | Report as abusive

70 votes enough for a Veto override but it’s not the President who opposes this bill but the House, the voters!

Posted by Jacques | Report as abusive

The financial crisis is directly related to 9/11, so how could it be more profound? If we had taken all the Iraq occupation money and put it into retraining all the misplaced workers in America, we wouldn’t be having this conversation.
The misconception that most people have is that the Fed is a government agency, it’s not. It’s a privately owned central bank that prints money for the US. This isn’t a bailout, it’s a hostile takeover of the US financial sector. What did they really think would happen by “staying the course”?

Posted by Brooks | Report as abusive

Well, this crisis the mother of all crisis because if we don’t handle well, it will be the fall of economy or free-market economy.

Yes, capitalism always produces excesses and the main cause is the US people spending more than what they earn. They borrow to survive, not borrow to add more productive capacity. This is alright if the lenders have faith in the borrowers’s ability to repay the loans.

Now that the banks don’t trust each other, next to come is corporate. Companies won’t extend credit to each other. Then in the end the government may not extend credit to its people because the people don’t trust the government. The people perceive the government to be ineffective in handling crisis.

So it is a Credit Crisis but more correct is Confidence Crisis. Hopefully it won’t turn into government crisis (like what happened to South East Asian countries in 1997-1998).

Regards,
AndyTheCoach
Singapore

Posted by AndyTheCoach | Report as abusive

Blended families, along with every other sector of the country, will probably feel the negative impact of the meltdown on Wall Street No one is immune to the fallout that has caused the federal government to step in with a multi billion dollar bailout to stabilize financial markets and prevent a total collapse.

The result of the crisis for regular families is generalized stress as people are threatened with foreclosure, ballooning mortgages, job loss or insecurity, rising gas prices, home heating oil, and food costs, as well as monthly bills and credit card debt. Blended families face increased pressure as they finance dual households and child support.