Adonis Diaries

Posts Tagged ‘EU

The Euro of the European Union (EU) currency is witnessing healthy devaluation compared to the dollar and needs to be lower to arond 1.1 to the dollar.  The increasing difficulties experienced by many States in the EU result from initial weaker economies that could not compete efficiently in the European common market and then were buffeted by the US financial crisis.  The European and international financial and political medias are breaking the taboo of discussing whether maintaining the Euro is a viable alternative in the short term.

The arguments of the group that staunchly defends the Euro is mostly based on political reasons: To them it is becoming a matter of safeguarding dignity and sovereignty.  It beieves that the Euro is the major factor in the reconstruction of the European market and for the political stability and the cohesion of the European market.  This group would like you to believe that without the Euro there would be no EU.

The taboo breaker group believes that the EU is in dire difficulty because it prematurly created a common currency before ironing out and strengthening common politics.  Germany and its satellites States in the northern hemisphere benefited most from the Euro since their currencies were highly overvalued “stronger” than the Euro and thus, they managed to compete better and export more to the European common market. 

The other States in the Union could not deal with a Euro that was much overvalued compared to their national currencies and thus, had to suffer in market competition. The financial and economic commotions in Greece, Ireland, Portugal, and Spain are symptoms of the financial and economic imbalance with respect to the vaster and stronger economies in Germany, France, and Italy.  This group believes that the EU is heading toward a deflationary period within a couple of years if no structural institutions are installed.

The main source of imbalance is that the original six States in the Union had firmir and better tested administrative and political instituions that could apply regulations agreed on and the capability to supervise and monitor laws and regulations governing the union members.  The weaker States are at great disadvantage: The main powerful States in the union have no confidence in the resilient determination of the weaker States to effectively executing the agreed upon regulations and second,  the weaker States are prohibited to issuing (printing money) to satisfy liquidity in their internal trade and commerce.

It is not the Euro that created the common European market: the EU was already instituted and functioning well before the common currency was created on political grounds.  The Euro was mainly to be the material “symbol” of the Union and this symbol degenerated into a calamity at the first major problem.  The EU could have imagined much less costly symbols for its unification until political coherence was firmly established, tested, and thoroughly evaluated.

The Maastricht treaty set limits to budget deficit below 3% and public deficit below 60%.  Currently, only Spain has kept its public debt at 54% and Germany its budget debt at 3.3%.  The remaining States in the Euro have doubled and even tripled both limits. Joblessness is very bad all over the Euro zone averaging 10%; Spain has 20% and Ireland and Greece about 14%.

It seems to me that the Euro has encourage many mafia type “economies” to expand simply because it became much easier to transfer a unique currency and circumventing further money exchange regulations and constraints.

The financial institutions and the medias are sending waves of terrors claiming that there is lack of confidence in the Euro; they claim that this confidence is so low that investors are shirking the Euro zone States.  I believe that the Euro should stay but be restricted to the main large economies such as Germany, France, Italy, Spain, Holland, Danmark, and Norway where the same homogeneous spirit for taking seriously the application of financial and economic regulations among the member States.

The other weaker States should have an alternative common currency, far devalued from the Euro and backed by the Euro until political coherence and institutions are equalized in efficiency and modernity.  The weaker States should enjoy the privilege of pre-empting slow internal trade by issuing liquidity in the newer common currency within limits.

Currently, this Teutonic vital space of Germany is at work from an economical perspective after the fall of the Berlin Wall.  Germany export is mostly oriented toward the eastern vast States that recaptured their independence from the Soviet Union in 1990.  Germany would have rather have its own European Union formed of Holland, Danmark, Sweden, Poland, Tchekoslovakia, Austria, and Ukraine. The western European States and Greece are just added burden that Germany feels it was pressured to supporting.  Probably, the European Union might adopt a second currency (alongside the Euro) just for internal trade purposes among the European States.  The internal trade currency could be labelled “Euro E” referring to the eastern European States so that the current Euro, implicitely a “Euro W” referring to the western European States, be mainly used for external trades outside the EU boundries.

Global Resolutions of World problems; (June 28, 2009)

            This essay intends to offer viable global resolutions to the global problems that I posted previously.  I developed on the eight main global problems:

 

Fact one:  Climate and environment quickly deteriorating.

Fact two:  Birth control is not efficient in the mostly under-developed States

Fact three:  Potable water and water for irrigation are dwindling fast.

Fact four:  The middle classes in China and India are expanding alarmingly.

Fact five:  The world economy is experiencing serious deflationary period.

Fact six:  The world is going through deep financial crisis and recession.

Fact seven:  Effective military spending should decrease but it didn’t.

Fact eight:  The identity crisis around the world is destabilizing order and security.

 

            At this junction of human development, the global problems we have to face attest to the successes and accomplishments of man, his mental scientific genius, his legitimate ambitions for acquiring what he can afford to, his quest for liberty and the reward for a comfortable life after a hard day work.  The global problems we have to resolve attest to man ethical and moral failures to catching up to his mental agility.  Man has proven his individual instinct capability for survival in a sustainable earth; man has now to prove that he developed enough collective instinct to survive an earth on the way to depletion.

           

            The eight main problems cannot be solved separately; not a single problem can be solved by one nation.  The interactions among these problems mesh tightly and resolutions should be studied and analyzed as an entity, a complete package, by a world forum, meeting regularly, and then assigned to a central executive power.  The United Nation is firmly established and has a wide data base, current and on global scale.  The first step would reasonably be to re-organize the UN with fresh competence, specialized departments, and actual executive power but the State superpowers are not showing signs of investing time on re-structuring the UN potentials.

            Veto power by a single State (one of the G5) to shut down resolutions by the other 194 States is troubling.  More States are entitled politically and economically to be assigned permanent seats so that political decisions results from equitable balance in power.  In all Parliaments there are committees for specific issues; I don’t see why State representatives in the UN are not allocated in committees so that the world community feels that it has a share in the well being of earth’s citizens.

 

            Globalization after the fall of the Berlin Wall exacerbated many of these problems and added a few more serious problems: it belittled culture and replaced serious reflections with information; it pressured many States to organize into economic blocks to face up to a unipolar world power; it generated identity issues and radicalization of religious extremism under the guise of autonomous and independent tiny States; and it eradicated local based civilizations and traditions that had power to participate effectively in social progress and management.  The new ideologies of civilization clash, the death of history, the only valid political system of conservative capitalism, and the dominance of the American language and way of life were meant to confirm the new unipolar political system.  The world was to become a village governed by a central power and the financial crisis proved the danger of globalization “US style” or State ideology circumventing and crushing other viable ideologies. The US Defense Minister Rumsfeld went as far as cursing Europe as “senile old Europe” because it adhered to legitimate ethical standards.

 

            Environmental re-habilitation and climate management and control are political in essence.  This problem is linked to increased urbanization and over-production and competition on world market in order to boost GNPs and secure higher political ranking among the G20.  Containing CO2 emissions and stabilizing them to current levels is feasible at the expense of erecting nuclear power plants because the “clean” alternatives of elonean and hydraulic power generations are limited in production commensurate to the exorbitant cost.  China and India must convert any new car put on the highway into much cleaner energy efficient vehicles or any solution for stabilization of CO2 production will fail.

            The major worry is the emission of methane gas, worse 20 times than CO2 for the warming up process, which oceans have started to spew. Earth regeneration is a slow process and for the Arctic to recover is not foreseeable in the medium term.  Reforestation is also feasible but younger trees are no supplement to efficient old trees that are dying and decomposing.  Until the tropical forests resume their natural function of absorbing more CO2 than emitting then earth environment is in serious trouble.

 

            Birth rate control is plagued by superstition, ignorance, oligarchy systems, and extremism in many societies; these deficiencies are increasing and worsening in under-developed States.  Birth control must be a decentralized enterprise and tailored made to customs and traditions to be successful in the long term.  Only higher rate in education, exposure to other civilizations, active dissemination of female rights and enforcing them, and increased local facilities to generating job opportunities can stabilize birth rate to manageable level.

 

World finance currency has to be stabilized in order to avoid desastrous fluctuations not based on sound economic output and real trade exchange.  I suggest the following steps:

            First, the developed States have to agree on another tangible standard for currencies.  Gold would not do because the US has abolished it in 1967 because all the gold in the world could not sustain the huge amount of paper dollars circulating or intended to circulate around the world.  Gold extraction, even if practically depleted on ground of economic feasiblity, can always be re-used and circulated but has no industrial value.  The alternative is a basket of depleting minerals that are essentials for manufacturing and production.  The processed minerals do not have to be rare but very essentials for development.  The US can agree to this idea since it has huge reserves in many important minerals.

            Second, all the States that can account for at least 3% of all curency circulation should join an “International Money Printing Council” with tight control and monitoring creteria.  The first States in ranking with combined shares of over 50% of cash money in circulation on the global market should have a veto power.

 

            There are serious dangers that can wreck havoc to any global resolutions if politics succumb to one of Three Global Temptations.  It is appropriate to consider the example of a team of rock climbers.  The team has the appropriate equipments that are tested scientifically and the members have the proper physical training.  There are three main risks for the team to fail in his mission of reaching the top.

 

            The first temptation is that a member of the team going berserk and taking a dive: this member can carry down the rest of the team with him. A few people have this urgent temptation to dive, and when available, they would try dangerous acrobatics.  Luckily, the two populous nations of China and India have taken off; they have the tools, the technology, and the means to care for their over 2 billion citizens; the main worry is that they are trying to catch up in a few decades what took centuries for the USA, Europe, and Japan to reach in stable governments, and legitimate desires for comfort. The accelerated trends in China and India for over production are a dangerous temptation that needs to be tampered by political sharing at an equal footing.  

            There are many more millions who have been humiliated for centuries and robbed of their basic dignity; they have not gone berserk because of poverty in means for survival as individual; they are dangerous because of a collective sense of insignificance and desperation toward the policies of the colonial powers of resuming this process of humiliation and denying them even diplomatic respect as recognized States.  Not all Moslem States feel this desperation: Iran, Indonesia, Malaysia, and Turkey have taken their destinies in their hand.  What the European Union and the USA have to focus on, right now, is to salvage the remnant of dignity among the Arab populations.

 

            The second temptation facing the team of climbers is the wall, the rock face. Most team members might have the techniques of sheltering from falling rocks, slippery sections, brittle portions, and blowing winds.  Human kind has learned to take shelter until the danger passes over.  Most of us have developed the instinct of prudence, such as not interference and keeping low levels. We are at a junction where danger is not to pass over on its own volition and no sheltering behavior can protect us for survival.

            Human kind has to move as a team of bold activists and turn out heavily to put their words and opinions at work.  If we hold to our tribal customs, our illusory identities, our comfortable life styles, our chimerical convictions then all is lost.  The team has to support the weakest member as difficulties surge and be confronted collectively.  The best means is to include the weakest members in the resolution programs so that they acquire the ropes, skills, and confidence to share in the task.

 

            The third temptation braving the team is deciding on the target of the mission and it has to be a collective goal. There are no tops to reach in human progress but there are defining phases.  We are at the dawn of Prehistory and a new kind of history has to be achieved and written. Tribal history has done its function but it is of no use for our current global problems. National wars, religious wars disguised as ethical values, ideological wars, cultural wars, or war of “civilization” have been tried and they all failed to bring reprieve and salvation. A new adventure for human kind is facing us boldly and we have to invent a new kind of history more appropriate to our survival. The new history should be focused on resuming our medical successes, eliminating pain and diseases, eradicating weapons of mass destruction, keeping us functional in old age, overcoming illiteracy, investing on continuing education, creating opportunities for various skills, desires, and achievements, preserving local languages and literature, managing human rights, and salvaging the dignity of every human being.

 

            Frankly, The European Union is actually the main laboratory for confirming that “Tribal History” is exhaling its last breath; that human dignity is not measured by fictitious apartheid scales based on color, religious affiliation or ethnic origins; that humiliating man is not a point of view or can generate any temporary benefit. If God has been angry for millennia then man has an opportunity to prove that he can harness collective instinct for survival to reverse that anger and make God feels proud of his Creation.

The Bible of Global Problems: Global Resolutions; (June 23, 2009)

 

Note:  This essay was inspired by the manuscript “A World Adrift” by Amine Maalouf. I added and developed on more global problems.  The style is Levantine; Bible style because the problems are established and need urgent global resolutions.  I will mentions the facts separately and then undertake the analyses of the interactions of the global problems before considering viable global resolutions.  This post will focus on the problem. The follow up post will consider viable global resolutions.

 

Fact one:  Climate and environment quickly deteriorating.

Fact two:  Birth control is not efficient in the mostly under-developed States

Fact three:  Potable water and water for irrigation are dwindling fast.

Fact four:  The middle classes in China and India are expanding alarmingly.

Fact five:  The world economy is experiencing serious deflationary period.

Fact six:  The world is going through deep financial crisis and recession.

Fact seven:  Effective military spending should decrease but it didn’t.

Fact eight:  The identity crisis around the world is destabilizing order and security.

 

Fact One:  Climate and environment are quickly deteriorating.  The ten signs of alert are proven in the following evidences.

 

            Oceans are turning more acid.  At 8 kilometers of the Californian coasts shells and corals are being dissolved. In the Pacific Ocean, 30% of mussel has disappeared.  Planktons, the basic food chain for fishes, small and large, are no longer abundant; 30% has depleted since the industrial age.

 

            The Arctic is changing drastically. Ice field has melted by 27% in the last two decades. Temperature increased by 3 degrees in the last 5 years.  Thus, the more ice melt the larger the surface is exposed to direct sun rays and consequently the more the rate of ice melting increases. The level of oceans is increasing and covering more dry lands.

 

            The Amazon and tropical forests regions are drying up and liberating higher quantities of carbon dioxide.  This equatorial forest is liberating more CO2 than absorbing; absorbing CO2 was their primary function.  More trees are dying and thus liberating more CO2 by decomposition. The higher the concentration of CO2 the lesser trees “perspire” and the more reduced are rains in quantity and frequency.

 

            The climate in Antarctica, the main source of future potable water, is milder; temperature has increased by one degree since the fifties. Salinity of sea water in the southern globe is decreasing.  The Antarctic must be melting faster than observed.

 

            Seasons are in advance of schedule and migratory birds are suffering.  Spring is one week earlier in Europe: 75% of birds studied in Europe have declined in number and migrating further north and seek higher altitudes.

 

            Dry seasons are extending. Monsoons are rarefied; precipitations are decreasing and the desert in North Africa is expanding southward western Africa.  Deforestation might still be the main culprit but the warming up of the environment is catching up fast as the main factor.

 

            Methane gas, present as methane hydrate in maritime sediment, is escaping from oceans. The under layer of pergolas (pergelisol) used to act as a lid but more abundant hot water is being ejected in the Arctic seas; the concentration along the Russian coast is 200 times superior to normal.  Methane gas is far worse than CO2 (20 times more powerful in retaining heat) for the warming up of the environment.   

 

            Glaciers such as the Himalaya and the Quelccaya (Peru) are losing 0.85 meters in their thickness every year. Around 40 frozen lakes in Nepal and Bhutan are breaking up.

            Sea levels are climbing 3 mm every year on average; the levels in the Pacific Ocean and Mediterranean Sea are reaching the alarming climb of 20 mm a year.

 

            The warming up of the climate is accelerating dangerously. Temperature increased 0.6 degrees just in the last 30 years while it took a century to increase 0.2 degrees before then.  The concentration in CO2 has increased to about 400 molecules per million; it was just 270 before the industrial age.

 

The liberation of methane gas and the drought of tropical forests are the two major factors that show evidence in the acceleration of environmental degradation.  The fast degradation has overtaken current research data that are no longer suitable for predicting the approaching calamity.

 

Fact Two:  Birth control is not efficient in the mostly under-developed States.

 

            China and India are supposed to have gotten birth rate under control but it is not because of higher educational level and better standards of living.  There are evidence of massive euthanasia practices on females and minorities camouflaged within laws interpreted very loosely and selectively. In the under-developed States political instability, poor security for law and order, unsustainable social institutions, and lack of financial and technical supports are exacerbating an already dangerous trend.  The UN is short on money and manpower in its specialized sections to counter this scourge. Over 50% of the population in Indonesia, Egypt, Nigeria, Pakistan, Sudan, and Iran for example are under 15 years of age. (Global viable and alternative resolutions will be developed in a follow up article)

            In Japan and many European States the trend is reversed; over 30% of the population is elderly (above 65 years) and draining the health budgets.

             

Fact Three:  Potable water and water for irrigation are dwindling fast.

 

            Climatic changes, heavy river pollution, accelerated urban centers, high rate of birth, and the early melting of mountain tops are depleting potable resources faster than expected.  Many States rich in rivers, especially those witnessing drought seven months per year, have not be aided in erecting dams for emergency seasons.  More States conflicts are centering on equitable potable water sharing.  The criticality of water supply is one of the main problems facing people in the coming decade.

 

Fact Four:  The middle classes in China and India are at least three times larger than the combined numbers in the USA and Europe and growing quickly.

            China and India are experience much better increases in their GNP than the USA and Europe during this downturn.  Consequently, China and India will focus on their internal markets to grow their economies in the same manner as the USA has been benefiting for over three centuries.  Middle classes demand to have consumer goods available since they have the money to purchase them.  They certainly have this right.  The problem is that purchasing cars is the first priority for middle class citizens with investment in infrastructures and facilities to abuse of these vehicles.  China has already surpassed the USA in the number of purchased car this year. India is making available inexpensive cars marketed at $2,000 in India. The kinds of energy sources that will drive these cars will have great consequences.  Consumerism can drive economies but depletion of natural resources requires a cultural change to accommodate a sustainable earth.

 

Fact Five:  The world economy is experiencing serious deflationary period.

            The world economy is struggling and the downturn is expected to last for at least 5 years.  This might be the best excellent news for a sustainable world production. There is the need for drastic diminishing of redundant and irrelevant consumer goods that can be substituted easily for human survival. Globalization created economic blocks with objective of exercising political pressures on the established developed nations.  The economic or trade blocks such as South-East Asian States, the Southern Latin American States, the Gulf Arab/Iranian States, and soon a few African States are struggling to stay above water and keep up with the fast moving globalization trend.

            The International Monetary Fund extended three quarter of its resources on the already industrialized states since its inception in 1944.  The G20 decided to triple the IMF fund to $750 billions.  The G20 will extended 44% of the funds, the other developed State a third and the over 55 poorer States will cover 17%.  It was hoped the restrictions and conditions for funding projects will be reduced from 17 conditions to 5 but nothing has been materializing so far.

 

Fact Six:  The world is going through deep financial crisis.

            Millions of workers and employees lost their jobs in a few months and that trend is increasing faster than expected.  The infusion of trillions of dollars into banks in order to facilitate the flow of trade transactions did not save banks from declaring bankruptcy.  The meeting of the biggest 20 financial markets that produce over 85% of the world economical transactions has not reached any consensus as to the financial basket reference for money fluctuation or the control of paper money issuing rights of individual power States. Consequently, the financial crisis is opened to dangerous more frequent reversals on a downward trend.  The USA is heavily relying on China for covering its increasing debt by purchasing US Treasury Bills.  China will be facing enormous capital investment inside because of the consequences of rapid economical strategies.  The rivers in China are over polluted, drought seasons are more frequent, and over 30 millions working in urban centers have been forced to relocate to rural areas where no job opportunities are available.  The moment China decides to cut down on financing US debt the dollars will be devalued (for printing more paper money than the economy can support) and another financial crisis will loom on the horizon.

 

Fact Seven:  Effective military spending at the increase.

 

            People expected a rational decision by States in this economic and financial troubled times; people were hopeful that military budgets should decrease to balance other more needy budgets such as health, the environment, creating productive jobs, and education.  The reverse happened:  every major State that exported military hardware increased its military budget and it skyrocketed. The USA expenditure is more than double China and Russia combined and the fields of military operations expanding around the world. Societies are far more unstable and experiencing high unemployment rates and lower quality jobs for the qualified graduates. 

 

Fact Eight:  The identity crisis around the world is destabilizing order and security.

 

            After the fall of the Berlin Wall in 1989, Europe had to face up to the identity and ethnic crisis in East Europe such as ethnic and religious “cleansing” and the drive for independence of tiny States within the disintegrating Yugoslavia and the Soviet Union. The European Union (EU) is the best representative for projects of unification among States with identity crisis.  The EU is clearly the most advanced union in matter of forging ahead with ethical issues. 

            Gorbachev has declared recently that Europe squandered 20 years of potential opportunities for stabilizing the European continent after the fall of the Berlin Wall and the defeat of communist Soviet Union.  If we revisit the problems that Europe had to deal with in priority then Europe had plenty of excuses.  First, West Germany had to absorb the cost of the re-unification of the crumbling economy of East Germany; then the EU had to battle the consequences of the disaster of 9/11 of 2001 and the frantic pressures of the Bush Jr. Administration to rally Europe to the invasion of Iraq; then the pronouncement of the Christian Conservatives alliance of the US administration of the binary dicta “either you are with us or against us”; then the declaration of an old senile Defense Minister Rumsfeld lambasting “old and senile Europe” and getting hold of the European oil investments in Iraq.  The EU has now to come with a plan for the increased illegal immigration as the ideal destination location.  It must be that Europe was in a rejuvenation phase to have forged ahead in short time to a successful unification program.

 

            Global problems to whom?  These problems affect us all but the G20 something think that they are the only one concerned.  Solution to the G20 is lending money to more mega polluting mega projects.  So far, the UN did not propose a program to deal with global problems.  Not a single President of the G5 went public to remind us that there is such a program.  Life is going on leisurely as if dirt is swept under the carpet and that is worrisome; citizens of earth are not asked to contribute and share in the responsibilities. A follow up article will attempt to offer viable global resolution and will tackle the troubles with religious extremism and state ideologies.

We don’t care for Carrots, no more (May 9, 2009

A husband kept whinning that he badly misses his roots, in a remote mountain village. The wife was in a bad temper when the husband started his Jeremiades and she shouted at him: “For God’s sake stop it. Don’t tell me that I married a carrot!”

In political discourse, particularly when the political pundits of one of the colonial powers are arguing of the best tactics to deal with a recalcitrant under developed State, the cliché of “The best policy is the timing of when to offer the carrot or wave the stick”. Invariably, in the mind of the colonial powers the “quasi-citizens” of the colonized populations have been treated as donkey and it always worked; thus, they are donkey or behave like donkeys. In the mind of the colonial powers since nothing has changed then there are no urgency for policies to change. I sometimes wonder who is of a higher status emotionally and morally the donkey or the one who persists on riding donkeys or controlling and taming donkeys.

Save us all the carrots in the world if you just can forget us. The colonial powers’ foreign policies are of no use to us if the “covert apartheid” mentality is administered on the immigrants. Global resolutions and maintenance of global solutions cannot be sustained as long as “covert apartheid” is applied within the colonial powers administrations towards the immigrants. The issue of identity in the developed nations is a forced one by the political elite to exercise hegemony over the immigrants. The citizens in the developed nations are secure in their identity because they have none and don’t care to have any and refuse to be issued identity cards. It is the immigrants who are supplying this additional burden of sorting out roots for the benefit of homogenizing intelligence gathering to the National Data Base. The immigrants are fleeing their shameful identities and want to re-create a new life only to be reminded by the host nations that identity is unavoidable and that immigrants have to be re-grouped in ghettos.

The citizens of the developed nations can hop on any plane to any country with a simple passport and be welcomed as honored citizens of the world. The immigrants have to stay in long lines at the Embassies’ doors, then wait many months to be interviewed, then bring documents that prove that they have lots of money in banks before they are issued a lousy visa for barely two months to visit a boring country. The immigrant end up spending tons of money, and wait in long lines to see the collections of the painters such as Vermeer or Cesane just to prove that they are “a la mode”, that they belong to special clubs of the superclasses.

I repeat, global solutions to a world going adrift for the dieing human kind rely on winning the challenges of integrating immigrants in societies with sustainable institutions. This challenge is the burden of the USA and the European Union since China, India, and Japan are not the lands for the weary and the oppressed of confessional constraints and immutable traditions.

So many States are indemically deprived of substance for survival that they willing to fake that they didn’t get it. So many States are down on their needs and know that whatever aids they will receive will draw blood ten folds in return. So many States are at the bottom of the human scale because they know that those providing aids have devised techniques to milk fleece and not just human being. No Sirs, we have no use of your carrots; keep them for your pleasure. onfessional constraints and immutable traditions. So many States are indemically deprived of substance for survival that they willing to fake that they didn’t get it. So many States are down on their needs and know that whatever aids they will receive will draw blood ten folds in return. So many States are at the bottom of the human scale because they know that those providing aids have devised techniques to milk fleece and not just human being. No Sirs, we have no use of your carrots; keep them for your pleasure.

The Third World War is loudly tolling (February 27, 2009)

Dr. Abbas Bakhtiar published in February 23, 2009 on “Information Clearing House“ a valuable review on the current economic situation.  It is unfortunately one of so many technical or what I call mechanical explanations of the troubles but no substantive resolutions attached to it.  I will try first to abrige that article and then offer a few solutions.

“In early February, the International Monetary Fund’s chief Dominique Strauss-Kahn said the world’s advanced economies — the U.S., Western Europe and Japan — are “already in depression”. The UK, Italy, Spain, Korea, Taiwan are in depression. All these States and many more have watched their GDP shrinking sharply. Japan, Ukraine, Ireland, and Iceland have experience shrinking in the two digits. An important fact to remember is that this depression is synchronised and this synchronicity has been made possible by the globalization and accompanying deregulation; the very things that were making workers poorer and the rich, richer. China’s growth rate is estimated to be around 1 percent.

Middle Eastern countries have also been severely affected by the financial crisis. Oil prices that were around 120 dollars last year have come down to around 35dollars this year. Every country has slashed its expenditure with the accompanying slowing growth. For example recently UAE was forced to halt construction projects worth $582 billion or fully 45% of all projects. Dubai’s economy is in free fall, newspapers have reported that more than 3,000 cars sit abandoned in the parking lot at the Dubai Airport, left by fleeing, debt-ridden foreigners (who could in fact be imprisoned if they failed to pay their bills)”. Iranians, Saudis, Iraqis, Kuwaitis and others have also been forced to slow down or freeze many projects. One must not forget that many of these countries’ petro-dollars are re-circulated back into the US and European economies. Those funds are drying-up fast.

Turkey sitting between the Europe and Middle East is also suffering. Turkey has the largest GDP in the Islamic world. Turkey’s GDP was 750 billion in 2008, the GDP of Saudi Arabia was 600 billion dollar for the same period. A once dynamic economy is now negotiating with IMF for help.

The Federal Reserves’ forecast for 2009 shows a contraction of 0.5 to 1.3 percent of the GDP with official unemployment rising to 8.5 or 8.8 percent. Here one should note that this official unemployment rate does not present a true picture, since all those who give-up registering with the unemployment office or are barely working (part-time workers, etc) are not counted as unemployed.

The missing engine of growth

There are four factors that power an economy: consumers, investors, government, and a favourable trade balance. Some economies such as China rely on favourable trade balance and Foreign Direct Investment (FDI) for their growth. For example according to the Chinese Ministry of Commerce, from 1990 to 2007, China received $748.4 billion in FDI. At the same time, since its economic liberalization, China has recorded consistent trade surpluses with the world. For example China has registered trade surpluses of $102 billion for 2005 to $295. billion for 2008. China currently has accumulated nearly two trillion dollars in foreign exchange reserves.

In contrast to the China, the United States has relied on consumers and the government for its growth. U.S. consumers constitute only about 4.5% of the global world population, yet they bought more than $10 trillion worth of goods and services last year. In contrast the Chinese and Indian consumers combined which account for 40% of the global population bought only $3 trillion worth. The U.S. consumer spending shot up to nearly 77% of the economy.

Japan is once again entering another deflationary period. In deflationary periods, consumers spend less and try to save more. The fear of losing one’s job, the psychology of ever decreasing prices, and general feeling of doom act against free spending by the consumers. The Japanese consumption was only 55% of the GDP as much as the Euro zone. So the Japanese and EU consumers cannot help either.

The US consumers have to get used to lower spending levels for at least a decade, if not for good. American’s standard of living is undergoing a “permanent change” – and not for the better as a result of:

• An $8 trillion negative wealth effect from declining home values.

• A $10 trillion negative wealth effect from weakened capital markets.

• A $14 trillion consumer debt load amid “exploding unemployment”, leading to “exploding bankruptcies.”

“The average American used to be able to borrow to buy a home, send their kids to a good school [and] buy a car,” Davidowitz says. “A lot of that is gone.

The diminishing wealth

For people in general, shares act both as saving and investment. The average person buys share in hope of getting better return than the banks. It is also easy to get in and out of the market. The advancements in information and communication technologies, the costs of buying and selling have fallen steadily in the last decade. So now anyone with a computer can buy and sell shares. This ease of entry enticed an ever increasing number of ordinary people to enter the stock markets.

Now the people have been hit by three disasters. First they lost a lot of money in the housing market. Then they were hit with the collapse of the stock markets. Trillions of Dollars, Yens, Euros and Yuans have been wiped-out in a relatively a short time. Then many have lost their jobs and many are uncertain about the future job security. All these have had a tremendous impact on the consumers, forcing many to heavily reduce their consumption, which in turn have begun to affect businesses which in-turn are shedding workers to compensate for the loss of sales and revenues. This is a classical deflationary circle that feed on itself.

The governments’ response to this threat has been to stimulate the economy by pumping large sums of money into the economy. A decade ago, a hundred billion dollar was an astronomical sum. Today we don’t even bother to look at it twice. Today we talk of Trillions. A few hundred billions here and a few hundred billions there soon add up to a few nice trillions; especially the trillions that we don’t have.

Now we face a classical problem: the increasing budget deficits. Exactly when the economy is contracting and tax receipts are falling, the government expenditure is rising rapidly. In addition, the governments are buying bad debts and trying to spend more on whatever they can in order to arrest the increasing unemployment and stimulate the economy. These large sums have to come from somewhere. They can be borrowed or money can simply be printed. The problem is that some governments are opting for both.

So how can the US continue its deficit spending? By issuing treasury bonds and other security certificates of course. Both public and foreign governments buy these securities which are guaranteed by the US government. Foreign central banks alone held $1.76 trillion dollars in US treasuries. The combined holdings of Treasuries and agency securities by foreign central banks at the Fed totalled $2.573 trillion, up $11.223 billion”.

The coming inflation

So far the foreign governments and businesses have been willing to buy US debt, but with the current economic downturn things are beginning to change. In the last 5 years China has spent as much as one-seventh of its entire economic output buying mostly American debt. However, with the sharp slowdown in its economy, China is finding it difficult to keep buying. China has also come-up with its own $600 billion stimulus plan. This along with the falling trade surplus and the falling tax receipt will make it exceedingly unlikely that China can keep financing part of the US government’s deficit spending. The same applies to other countries as well.

As the economic downturn continues we can see two things: the interest on US treasuries increase substantially to make it attractive and or printing money. Printing money is not so farfetched as many would like to believe. Already countries that cannot find willing lenders are resorting to this. The Bank of England voted unanimously earlier this month to seek consent from the government to start the process of quantitative easing (means printing money) by buying gilts and other securities. With interest rates at 1%, printing money is likely to increase inflation.

It is especially appealing for the US government to print money since inflation means a real value reduction in debts. With mounting trade and budget deficit and decreasing tax receipts and the shrinking of the number of willing lenders, US government may not have any choice but to print money.

All governments are reducing their interest rates to historic lows and at the same time spending a lot of money that they don’t have. It will take at least two more years for the economy to stabilise (meaning an arrest in decline rather than outright growth). Once that point is reached we will begin to see the effects of the loose monetary policy: a tremendous rise in inflation which can be accompanied by low economic growth or in other words stagflation.

The current economic crises have left many countries’ local banks with foreign currency loans that they find difficult to repay in that currency. This and the possibility of defaults have made these countries a good target for speculators. If such an attack starts, many countries will automatically have to devalue their currencies (even more than they already have) or try to defend their currencies. In either case this may trigger yet another crisis that may actually destroy a good portion of many economies around the world.

Even if we assume that no more nasty surprises will appear in the next two years and the economies stabilise, we are left with the reduced levels of consumption around the world, especially in major economies. So there will be a dearth of market for the goods and services produced by others. In absence of the US, the question will be: which country or countries are able to increase demand to such a degree as to trigger a recovery; that most likely will be accompanied with high inflation?”

Dr. Abbas Bakhtiar (Bakhtiarspace-articles@yahoo.no) is sugesting a second “Bretten Woods” agreement where we can address the existing problems and restructure the world’s economic system, otherwise we will face protectionism, low economic growth, and even trade wars. Dr. Bakhtiar failed to offer a blue print on what to agree on.

I suggest the folowing: 

First, the developed States have to agree on another tangible standard (like gold) for currencies.  Gold would not do because the US has abolished it in 1967 because all the gold in the world could not sustain the huge amount of paper dollars circulating or intended to circulate around the world.  The alternative is a basket of depleting minerals that are essentials for manufacturing and production.  The processed minerals do not have to be rare but very essentials for development.  The US can agree to this idea since it has huge reserves in many important minerals.

Second, all the States that can account for at least 3% of all curency circulation should join an “International Money Printing Council” with tight control and monitoring creteria.  Any combined States with over 40% of cash money shares in the global market should have a veto power.

Failing a convincing and sustainable agreement for monetary stability the Third World War is altready in the planning stage as the easiest and quickest way out of that morass.  Only in major wars do printed money with no tangible backing has mythical values.  No, the next region for the war scene is not Iran: no European or US soldiers want to fight in this “cursed region”.  It won’t be Afghanistan: if Afghanistan was worth it then Bush Junior would not have invaded Iraq before stabilizing Afghanistan.  It won’t be North Korea: it is bordering China.  The batlefield will not be in any area bordering Russia.  It won’t be the Congo River zone: no Western soldiers is about to step in this infested and contagious disease plagued region with AIDS consuming 30% of the population.

The next world war is in Sudan. Sudan is a continent by itself and rich in all kinds of raw materials, oil, and water and land to sustain the world agricultural needs.  No, the superpowers will not directly fight one another. The war will last to the last Sudanese and any lame African soldiers that participate in the war. Egypt might get a tiny share of the spoil of the new colonial powers simply because it was impotent to secure its backyard.  Egypt and the Arab States are feeling the heat and scrambling; it is kind of too late.

Are you poor? Raise your hand! (January 20, 2009)

            If you are in a situation that prevents you to participate in social life then raise your hand: you are considered materially and morally poor.  It follows that you are poor if you are stuck in your “home” because you cannot mingle with people, in a society that expects standards in elegance, in frequency of eating out, of taking vacations, and of transportation means.  In a culture of “fitting in” you are poor if you were raised not to incur debt that your hard earned job cannot cover.  You are the poorer if the standard of living in your country is expensive and the facilities of support are not suitable in times of emergencies, for health coverage, for children well being, for continuing education, and for opportunities to work. 

If you feel ashamed to invite “friends” home because it is in shamble, the furniture and appliances outdated, or the walls needing another layer of paints then you are poor in such a society.  If you feel inclined to cancel invitations to weddings because you cannot afford a decent gift for the married couple then you are poor in such a society. If you are unable to enroll your kids in private schools because public schools are considered not equipped for the education “performance” standards then you are poor in such a society. You got the gist of my definition; except in situations of basic survival necessities, then the concept of being poor is specific to the culture and tradition of a society.

            There are many definitions of belonging to a “poor status”; it ranges from daily nutritional quality, to the minimum hourly labor rate, to the minimum amount for renting, and leading an independent living; to the bare subsistence for survival such is the condition of over two billion people around the world. 

            The European Union has come up with a statistical limit for being classified as poor. The office of statistics in the EU (Eurostat) adopted the median income for a State (the dividing amount of income that splits two equal number of earners) and then categorizes the poor whose income is within the 60% of the lower median income range.  Thus, it does not matter how the State’s economy improved, or the standard of living improved, or your income improved there will always be 30% of the population considered as poor (for example, 60% *50% = 30%).  Consequently, an EU State member has to allocate budget and plan to support 30% of the needy population.

            The EU definition for being considered poor is an operational categorization for a consumer economy.  If your income or the financial facility structure in your society prevents you to fit in a consumer society, to purchase an outfit that is the fashion of the year, to participate in the cultural and artistic activities, to visit a bar once a month, to go out and see the latest movie, or to buy tickets for festivities and sport events then you are not promoting the internal market economy and you are poor and need serious support to fit in as a citizen.

            The life of the hermit in a remote location is certainly hard; the life of a forced hermit in towns and cities is by far much harsher.  The hermit in cities has to construct his own model or philosophy to life and death; he has to build his specific character to survive the harsh facts within his society.  I have this theory: a poor State economy combined with poor financial credit facilities and high consumer standards the higher the odds for frequent civil wars.


adonis49

adonis49

adonis49

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