Global financial markets are increasingly acting in concert rather than always separately, reflecting both the ongoing integration of world banking and the suzerainty of the gigantic U.S. Federal Reserve. If the Fed catches cold, there’ll be a lot of sneezes around the world. Such integration, when things go well, is a blessing but it can also metastasize financial cancer from anywhere in the system, which is now anywhere in the world.
While the Fed and the Bank of International Settlements are both signaling an end to the era of cheap money out of inflation fears, the Bank of Japan, after decades of conservatism, has announced that it is turning on the money faucet. That may reflect a need to goose exports by cheapening the yen. It’s not a good sign. The world’s banks now resemble a chain gang of prisoners, marching along a cliff top knowing that some of their number are insane or suicidal. This is not a stable financial situation.
Then, we have the citizens of the various countries. Brazil is now indulging in massive, multi-city riots. Argentina’s President has just fled in a helicopter after resigning following huge riots. In China, last year’s Foxcomm factory riot is seen as likely to recur, while race riots in western China and likely food riots occupy the government. Russia’s anti-Putin protests, Turkey’s riots and the Hell-broth that is the Middle East continue, while central and south Asia increasingly indulge in ethnic rioting. We’ve been seeing protest riots all over southern Europe and in London and plenty of massive protests (short of rioting) in the U.S. The U.S. government has notoriously been stocking up on ammunition and training its military for riot duty. If the world financial system’s stability seems at risk, so does civil order.
To this volatile mix, add the economic conditions in place. Europe’s social bargain is a welfare state that can no longer be funded by most European governments, which therefore have indulged in deficits resulting in debt they cannot repay. A few places, like Canada in the 1990’s and Sweden more recently, replaced their governments with new ones, which paid down their debts. But the U.S. and the E.U, the primary markets on the planet, are stuck in economic doldrums without prospects of anything good. India and China are reflecting the decline of their largest customers. Those once-rich customers are declining, unable to compete with cheaper producers who have acquired technology from them. The world economy is equalizing, a good thing if you’re poor moving up; not so much if you were rich and are moving down. But as the carny said: “That ain’t all!”
The Spanish (and Indian) speaking poor of Hispanic America and the poor Moslems to Europe’s south are migrating north to the richer countries to escape the poverty and turmoil at home. The same thing is happening in Asia. The various Hispanic Americans moving into North America assimilate more easily than the Moslems, who appear to become destabilizing after reaching a certain percentage of the population. Back in the Moslem places, religious attacks on non-Moslems are renewing as Islamists replace dictators. None of this contributes much to stability, either.
Finally, there are the stock markets. A while back, New York, London and Paris mattered, they were taken seriously; none care much about events at any others. Now everybody is forced to care about events at any of them; they’re all tied together by the financial system and trade. And stock markets are notoriously emotional; invested money is a coward and never seems to learn not to overreact. One really bad day at any significant stock market could open the seacocks of the entire system.
So, do what seems reasonable and relax. The Canadians and Swedes hired new governments that guided them out of their version of our problem but they’re at risk anyway from the rest of us who haven’t done that. Integrating our world has been very productive…but it wasn’t free. We have assembled a jigsaw world without glue on the pieces.
Categories: Debt, Decline of America, Decline of Europe, Economics, Europe, Federal Deficit, Finance, Financial Decline of America, Immigration, Middle East, Politics, Religion, Society, Western Civilization