It is pure guesswork whether last night's European measures will create stability or trigger a further rout in financial markets when they open this morning. But two things are fairly clear about this surprisingly strong and cohesive package. First, while short-term stock market reactions are unpredictable, there can be reasonable confidence about the package's economic impact -- it will avert a catastrophic economic collapse or long-term depression. Secondly, the ability of European governments to launch their own financial rescue without waiting for US leadership represents a fundamental shift in global economic relations. Let me begin with this second point. Since the creation of the Bretton Woods monetary system in 1944 every global financial initiative of any significance has been devised, led and co-ordinated by the US Government. This US leadership did not mean that America always got its way in financial affairs -- nor that US co-ordination always succeeded, as exemplified by the breakdown of Bretton Woods in 1971. But it did mean that international financial initiatives were never attempted until ideas and the leadership came from Washington. The sole exception to this rule in the past 30 years was the creation of the euro; but this was viewed in Washington as an intra-European affair with limited global consequences. The present global banking crisis has been a very different matter, since it originates in the US itself. Even a few weeks ago a solution without US leadership would have been inconceivable. In the past few days, however, the failure of the Bush Administration to follow through in any concrete way on the $700 billion "Paulson package" that it rammed so painfully through the Congress, has focused attention on Washington's vacuum of leadership and ideas. Aghast at the dithering incompetence of the US in handling this crisis, European politicians have realised 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. In trying to do this, they have found an unlikely intellectual guide and champion: the British Treasury and Gordon Brown.
It is pure guesswork whether last night's European measures will create stability or trigger a further rout in financial markets when they open this morning. But two things are fairly clear about this surprisingly strong and cohesive package. First, while short-term stock market reactions are unpredictable, there can be reasonable confidence about the package's economic impact -- it will avert a catastrophic economic collapse or long-term depression. Secondly, the ability of European governments to launch their own financial rescue without waiting for US leadership represents a fundamental shift in global economic relations.
Let me begin with this second point. Since the creation of the Bretton Woods monetary system in 1944 every global financial initiative of any significance has been devised, led and co-ordinated by the US Government. This US leadership did not mean that America always got its way in financial affairs -- nor that US co-ordination always succeeded, as exemplified by the breakdown of Bretton Woods in 1971. But it did mean that international financial initiatives were never attempted until ideas and the leadership came from Washington. The sole exception to this rule in the past 30 years was the creation of the euro; but this was viewed in Washington as an intra-European affair with limited global consequences.
The present global banking crisis has been a very different matter, since it originates in the US itself. Even a few weeks ago a solution without US leadership would have been inconceivable. In the past few days, however, the failure of the Bush Administration to follow through in any concrete way on the $700 billion "Paulson package" that it rammed so painfully through the Congress, has focused attention on Washington's vacuum of leadership and ideas. Aghast at the dithering incompetence of the US in handling this crisis, European politicians have realised 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. In trying to do this, they have found an unlikely intellectual guide and champion: the British Treasury and Gordon Brown.
Except that I dislike the anglo-bias that is really anti-european in nature. This is an EU initiative and should be described as such. keep to the Fen Causeway
...has focused attention on Washington's vacuum of leadership and ideas. Aghast at the dithering incompetence of the US in handling this crisis, European politicians have realised that Henry Paulson, the supposedly brilliant US Treasury Secretary, was an emperor with no clothes.
There are not 2 choices: "create stability or trigger a further rout" - this could be a lingering hemorrhage, a calm before the next thousand cuts appear, or many other variations.
"... there can be reasonable confidence about the package's economic impact -- it will avert a catastrophic economic collapse or long-term depression." - or it can merely forestall or assuage said collapse or depression...or, more likely, the package will make it easier for the rich to collect on their hitherto collapsed investments, so that they can tinkle down on us some more.
"The sole exception to this rule {economic leadership comes from the US} in the past 30 years was the creation of the euro..." - Yes, I remember Brazil, Argentina and Venezuela asking US permission to form their banking Union just the other day.
Nope. Just because they are now brave enough to snipe at their erstwhile benefactor, it doesn't mean that they have a grip on the truth. Never underestimate their intelligence, always underestimate their knowledge.
Frank Delaney ~ Ireland
EU = safe
And we're all happy to know that the UK is part of the EU. In the long run, we're all dead. John Maynard Keynes
