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10/11/2008

One week to change the world

In one week, we are entering a brave new world. The Americans are now the biggest communist country, with its banks nationalised and the govt in control of many private enterprises. State intervention instead of letting the economy running along freely under capitalist system. Govt handouts and state welfare to help the poor. In one week, the G8 countries were bankrupted, practically. All resorting to printing more monies to aid their ailing economies and the banking systems. The G8 used to be known as a rich man's club, with the world's richest as members. Now the world's richest, in terms of liquidity available in the trillions, are not in the club. These include China, India and the Arab countries. The latter should form a new G group of countries where the real money is. G8 is history. The 'diseased' Sovereign Wealth Funds, SWFs, that were once shunned by the West and kept at arms length like lepers are now the knights in shining armour, welcome by their detractors to save their arses. SWFs are now in vogue, they are cool. They have the money. In one week, Capitalism dies. The excesses and the extremism of Capitalism dug its own grave and buried itself. In one week, all the financial wizards and all the whiz kids in New York are in debt, running risk of losing their jobs, and many have been exposed as simply con men and greedy crooks. In one week, George Bush's name will be engraved in stone in the Hall of Infamy as the US President that only knew how to spend money in starting wars but forgotten that there was an economy to look after. And he broke the banks. In one week, Europe and America went around begging for financial aid. In one week, America and Europe were lost in what they could do to save themselves from the financial mess they created. In one week, the world will no longer believe that the West knows what they are doing and should no longer be in a position to teach or tell the whole how to run their economies. In one week, the power equation of planet Earth shifted.

17 comments:

Anonymous said...

Did you see how they rally to safe themselves? i dont mean $$ i mean for a culture.

redbean said...

yep. remember how they walloped the govts of southeast Asia during the financial crisis? they thumped down even at suharto, twisting his arms to sign his death decree.

no saving of badly run financial institutions. let them fold.

karma is working very fast this time round.

Anonymous said...

Whether we like it or not, if the G8 countries go under, all others will be dragged down too. The rest of the world are so dependent on USA and the EU. If they go, we go too. That is the way it is. Greed is our downfall.

Greed is everywhere, in USA, in Europe and very much alive in Singapore too.

Anonymous said...

@#$@#$@#

Haven't you guys read matilah_singapura's posts?

It is NOT GREED. Sure there is GREED - and there will ALWAYS be greed under any economic system - but the MAIN PROBLEM is with STATE CONTROLLED FIAT MONEY.

Abolish central banks and their monopoly over the issuance of currency! Or at the very least insert constitutional ammendments to PRESERVE the purchasing power of the local currency (e.g. backed by gold, short term securities).

THIS IS THE PROBLEM, FOLKS.

And seems like MAS have dropped the ball and decide to inflate away~

Anonymous said...

What is collapsing right now is not capitalism - it has NOTHING to do with capitalism. It has ALL to do with the monetary system i.e. state controlled fiat currency.

Looks like the entire world is taking a turn towards the left (socialism) - oh boy.

The American government is bankrupt (for a long while already, actually), and most American citizens are poor. But don't forget that there is still tremendous wealth centered in private hands.

I would suspect that the centre of things would gravitate towards the East (even though they have a lot of problems themselves). But don't forget these guys, being human, are tricksy - they pulled off the opium war after all.

Anonymous said...

Before the tech bubble burst, Amazon.com's worth was even more than GM. And Amazon.com was just a run-down small office selling books on-line with little tangible assets. That is what wealth is built on since, just incredible.

All this illusion of wealth is created by the banks multiplying their lending ten-fold out of every dollar they receive in deposits.

This is not the only problem weighing on the world's financial system. They have not even talk about the losses suffered by the Pension Funds from the stock market meltdown and the credit card crisis which is about to erupt when jobs are lost. Again the banks are to blame.

Anonymous said...

And sad it is that the banks are to blame - this leveraging had the full blessing of the state and central banks, and was in fact encouraged.

Anonymous said...

Who created the mess? The Federal Reserve and American government. For once accept the truth, people - it is times like these that we have to trust the free market and laissez faire.

Matilah_Singapura said...

For those of you who are old enough, it's Oct 1987 all over again.

Think of te possibilities :)

Anonymous said...

Banks are in trouble, Bank Customers are in trouble, but many bankers maybe smiling.

patriot

Matilah_Singapura said...

I'm not a banker. And I'm still smiling.

I hate to say "I told you so".... actually I don't (but am restraining myself from crowing about it)

Anonymous said...

So do you see the dollar collapsing soon - or will that Armageddon event be delayed again and we'll expect a recovery in (nominal) prices of real estate and stocks in the short-term?

I'm betting that hyperinflation will be the next stop. Much of the world is already in stagflation actually.

Anonymous said...

In reality the US Govt or for that matter all world Govts, the Fed, IMF etc are actually clueless about how to deal with this crisis, just like you and me. The only solution they have been adopting is just pump money into the system. Whether it will work is still to be seen. But we are not seeing the end yet even if they solve the liquidity issue. The insurance sector is next, some pension funds will also go down and also the problem of credit card debts coming into the picture. Very uncertain.

Matilah_Singapura said...

> So do you see the dollar collapsing soon

No I don't (as much as I might harbour a secret desire that it will).

The USD is the world's reserve currency. If there is collapse the whole damn system goes - especially govt debt markets.

There is only one sustainable way to wealth and therefore human survival: trade. Many people believe it's "production" so thre's a psychotic fixation on "productivity".

The point is you can produce too many goods people don't want - i.e. no market, unmarketable goods. Unless you are trading, you're going backwards.

The pump of liquidity fundamentally allows people to continue trading, and producing the stuff to trade.

As long as people in general accept a universal meidum of exchange life can go on - in spite inflation, stagflation, depression etc.

Anonymous said...

re: matilah_singapura

I'm not so sure - people are no longer optimistic about the American economy, and other central banks are finding it difficult to continue supporting the dollar (due to domestic inflation). There's still the on-going war, and when social security explodes in a few years... Bernanke seems to have given up on the value of the dollar.

A bond disaster and a dollar collapse could still happen. I can't see an easy way out of this.

And yes, legal tender laws are stupid.

Matilah_Singapura said...

to anon:

I'll play the devils advocate here.

With legal tender laws, the govt is in a "no-lose" position.

Because of the legal tender laws (backed up by the guns of the police, treasury and whatever agency the prevailing administration decides to invent) people are FORCED to use the currency to trade (i.e. LIVE). Also all trades are subject to TAX (theft or extortion -- depending on how you see it) -- excise, duty, consumption tax, "sin" tax, etc

The govt EXPECTS taxes owed to be paid in legal tender. So we're screwed. No choice but to use the currency -- even though the currency is broken. You can't trade legally. Sure on the blackmarket, anything is possible and the blackmarket will grow, and another medium of exchanged might be used (like gold and silver).

But LEGALITY (although immoral in this scenario) is an important point. Imagine doing all your transactions in the blackmarket: buying food, coffees, paying for phonecalls... all the simple things we do everyday. Living in a world like that would be intolerable. This would mean virtually all trade is conducted illegally because the legitimate economy has collapsed.

The world in which such an economic system operates would be bleak -- people would be dying, a breakdown of social order.

Historically, this has happened. Could it happen in this instance? I believe it is possible, but I don't think it is probable.

The reason I cite is that the developed world has a lot of wealth. Just because the currency loses value or the stock market tanks doesn't mean the "wealth" disappears. Buildings and factories don't vanish, the utilities still work, no one's turned off the internet, and people are still using their ATM and credit cards.

The only way the fiat currency system is going away, along with legal tender laws if if the state disappears i.e. countries or cities become their own entities (tribes) without the structure of a state.

Singapore e.g.: Now a city-state. Take away the state, it becomes a city. How to govern? Many ways: Mayor, council of citizens, full privitisation -- ie. incorporated city, or a loose "federation" of towns -- Bishan, Yishun, Queenstown, Tanglin etc all headed by mayors or CEO's getting together by some sort of written agreement.

Towns will have their own banks which will issue money. The danger of issuing "bullshit" currency is that no one will trade with you if you offered bad money in transactions. So people would demand that their towns issue "hard money", and no one would dare inflate, because if they did, they would be caught, and it would get nasty.

However, I don't think the state is going away. Not peacefully, anyway.

Anonymous said...

Sounds a bit like the Swiss model to me. Still not entirely sure why they went off the pseudo-gold standard.