World Stability Hangs By A Thread As Economies Continue To Unravel

[Purveyor]

The political bubble is bursting. Spreads on geo-strategic risk are now widening as dramatically as the spreads on financial risk at the onset of the credit crunch.

By Ambrose Evans-Pritchard
Last Updated: 7:15PM GMT 01 Dec 2008

Whether it is the Indian rupee, the Shanghai bourse, or Kremlin debt, the stars of the credit boom have fallen to earth. Investors are retreating into 3-month US Treasury bills – the ultimate safe-haven. The yield has fallen to 0.02pc, less than zero after costs. You pay Washington to guard your money.

The working assumption of the "Great Boom" is – or was – that we live in a benign era where most societies are converging towards some form of market liberalism; where trade and capital flows are unrestricted; where governments have enough legitimacy to keep order by light touch; where a major war is unthinkable.

This illusion is now being tested.

We should not to read too much into the Bombay carnage. It may or may not be significant that the Deccan Mujahideen – whoever they are – picked India's financial hub to launch their spectacular.

--SNIP
The exodus of foreign capital may now quicken, laying bare the horrors of Indian public finance. The combined federal and state deficit is 8pc of GDP. Plainly, spending will have to be slashed.

--SNIP
"The global financial crisis has not bottomed yet. The impact is spreading globally and deepening," said Zhang Pin, head of the national development commission. "Excessive bankruptcies and business closures will cause massive unemployment and stir social unrest".

We are about to find out whether China has made the wrong bet with a development strategy of vast investment in manufacturing plant for mass export at thin margins to the US and Europe.

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TELEGRAPH UK: http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/3537362/World-stability-hangs-by-a-thread-as-economies-continue-to-unravel.html

[BR_Parkway]

1. A headline I never expected to read in my lifetime. Thanks Bush

[Vincardog]

2. Don't blame the idiot bush blame RAY GUN and all the braid dead CONsurvatives

[natrat]

3. and all the democratic enablers, and their are many

[Demeter]

4. The Would-Be Masters of the Universe

Are proven to be a bunch of 6-year-olds trying to drive the family station wagon, and crashing it into a pond.

[bertman]

5. Outstanding analogy, Demeter.

[KoKo]

6. What I still can't come to grips with is how it all came down on everyone's head at the same time...

The strong conspiracy side of me says..."Engineered Meltdown." The Conspiratorial Side that conflicts with the Rational says something about "Shock and Awe."

Something between the two is probably the truth...but it's so rare for all markets to fall at once and every stock in the stock market to get hit at the same time with money market funds going the way of stocks that it blows that "Diversification Mantra" we were all told to chant 'outta the water.

If "Diversification" saved no one (nowhere to run, nowhere to hide) then what was it all about? And how could it all have seemed to be perfectly coordinated to all come down at the same time?

Who wins? Who loses? :eyes: :crazy:

[Hawkowl]

7. Diversification is impossible because of distribution

When 5% of the population owns 90% of EVERYTHING, it means a handful of panicking rich elites can wreck the entire world's economy by pulling all their investments and holding cash. Now imagine when 4 out 5 mega rich, masters of the universe types, liquidate their investments and simply refuse to lend out the cash. WELCOME TO 2008!

This is the elephant in the room no one talks about. The economy is not diversified because it is controlled by a handful of corrupt, psychotically deranged mega rich.

I've recently read that during the past 5-8 years, the richest 400 people increased their net worth by over 600 BILLION DOLLARS. In order to diversify the world's economy and insulate it from these types of financial panics, less wealth inequality needs to be achieved. We need 90% marginal tax rates along with a livable minimum wage. Until wealth and income inequality are addressed, we are heading towards the Greatest Depression, or Great Depression II or economic hell beyond your imagination.

[Demeter]

8. Wide-Spread Fraud--It Touched Everything

We were flooding the world with counterfeit securities "as good as the dollar". In the process, the dollar and everything denominated in dollars was debased. And these frauds continue. No one has said: "thou Shalt Not Write CDOs SIVs etc." Even subprime mortgages continue.

[bemildred]

9. It's not new.

The notion that people, even people of reasonably normal intelligence, are "rational actors" is way overstated. This has already happened over and over again.