I believe it’s been addressed in other threads, but as someone who doesn’t know much about how economic interdependency works, I’d like to ask this in its own thread: if we were to assign blame to why other countries’ economies are doing poorly, how much can we blame the United States? Did we cause them merely by just failing ourselves, and the other countries did, and could do, nothing to stop their fortunes from sliding along with ours? On the other end of the spectrum, how much of a role did we, our government, our companies, and our financial people play in getting other countries to do or not do X, Y, or Z that caused their subsequent economic problems? For example, any coercion or trickery involved?
I’m not an Economist, but then everyone thinks they’re an expert these days :).
Leaving aside the financial irregularities for the moment, as the country with the largest single economy any American downturn unavoidably affects the rest of the world. Equally though, the rest of the world rides your coat-tails during the good times so it’s all in the game.
The financial market issues are slightly different. Here it could be argued that a serious failure in American financial regulation has exposed the rest of the world to unfair risk, while America got most of the benefit from the good times. One example that I happened to remember Cite.
This is not true in all cases. Countries such as the UK and Iceland that had large and successful financial sectors and were also heavily invested in under-regulated securities can hardly claim to be innocent victims. I can’t see any trickery involved here, just an old fashional case of greed or incompetence. On the other hand countries like Spain that restricted this type of trading have suffered less badly. In fact Santander, a Spanish bank, has recently bought up some UK banks due to its relatively good health. Whether this is due to intelligent foresight or blind luck I don’t know, though I imagine there must have been considerable pressure from the banking sector to ease regulation during the good times.
So I think a case can be made, but it depends on who is complaining. I don’t know enough about Canada’s financial sector to comment on it specifically.
It is a global problem. But US regulators dropped the ball. The sub prime underlying problem was Made In America. Greenspan screwing up by not popping the “irrational exuberance” bubble and then making a soft .Bomb landing by letting the property bubble inflate was an American.
Global investors poured fuel on the bonfire. AIG financial products, the fucktards that guaranteed most of the exotic derivative radio active waste that’s been blowing up was a group of 200 people in the UK.
So, without really diving into it, the US has a definate large amount of responsibility.
Complex question. Let me try to break it down and give my view.
>>Did we cause them merely by just failing ourselves,
Mostly yes.
>> and the other countries did, and could do, nothing to stop their fortunes from sliding along with ours?
The crisis has affected each country quite differently and in great part it is due to their own actions. For instance, in Spain the banking sector is quite heavily regulated and came out of this quite well. Santander lost quite a bit with Madoff but even they have said they will compensate private investors (but not corporate or institutional). On the whole Spain has always had a healthy banking system which in many ways has been world leader. This is surprising in a country which is not known historically for its entreprenurial class. So, in the case of the Spanish banking system the answer is that they were pulled down in the measure that they chose the wrong investments but, to be fair, it was not evident that America was screwing up so badly. People like to think the American government know what they are doing and will sometimes persist in that view even in the light of contrary evidence.
While the banking sector in Spain came out of this reasonably well, on the other hand, the economy as a whole was based on a huge building, real estate, bubble which even the biggest idiot could see was destined to burst. That is 100% of Spanish responsibility and the American banking crisis was just the prick that initiated the meltdown. If it had not been that it would have been something else or just time.
>> On the other end of the spectrum, how much of a role did we, our government, our companies, and our financial people play in getting other countries to do or not do X, Y, or Z that caused their subsequent economic problems? For example, any coercion or trickery involved?
You’d have to define coercion and trickery but my answer is NO, nothing out of the ordinary.
The economies of the world are very tightly linked and any disaster of this magnitude would have had the same repercussions. Many like to think that it is the American economy that drives the world and when it suffers the rest of the world suffers but it would be impervious to problems in other places. This, of course, is nonsense. A large downturn in Europe or Asia would also have worldwide effects and would negatively affect the American economy.
It was Made in the USA in the sense that the black-hole derivatives problem is at root the sub-prime issue but we live in a global economy. Soros avoided derivatives on his principle that he did not invest in anything he did not understand. The actors in the global finance system did not. Everyone bought into them and everyone ignored the self-evident fact that bubbles burst.
Global financiers are to blame.
The same bunch of bastards partying at Davos at the moment while the rest of us pray for a convenient small-scale asteroid strike.
They already have, actually. It’s going to take a bite out of this year’s bottom line but it’s not like Santander can’t afford it.
The bursting of the Spanish construction bubble was something that had been getting predicted for years, just nobody was sure when it would happen. As my agent told me, “when cabbies are telling me about buying two under-construction flats with the sole intent of selling them as soon as they’re finished, it’s quite evident the bubble is about to pop.” The americans had nothing to do with that; the taste of so many Spaniards for “under the table money” and “making it rich fast” (as if… see Madoff-style financial pyramids like the initial sales for Terra stocks), on the other hand did.
I should soften my statement somewhat (I posted it before going to bed with aching teeth - not my best frame of mind); yes, I believe the US legislators and bankers have A LOT to answer for with letting things get as out of control as they did, but no one held a gun to anyone’s head in Canada and forced them to buy into such an obviously flawed money-making scheme. There are allegations that the stinky mortgages were buried and lied about (which I have no problem believing), but I don’t know how many people who went after them were going after the quick buck, with the usual end result. I guess the whole world is getting a crash course in what a global economy really means.
I guess I have to look to Canada for our share of the blame for being as dependent as we are on the US as a trading partner, too. The first rule of anything to do with money is not to have all your eggs in one basket, and if the US is our only basket, we need to learn our lesson from that, in spite of how convenient a market it is.
If we’re going to look globally for causes of this downturn, I think we have to include the Chinese government as one of the principal perpetrators as well, for currency manipulation. Holding their currency down to a below-market level made their exports that much cheaper. Money floods in to China. China dumps that money in US investments, banks, and T-bills, driving down US interest rates and leaving banks awash in cash. Banks have so much money to lend that they expand into subprime mortgages.
I’m not saying this to excuse any of the bad decisions that were made in the US; I’m just suggesting that the roots of this crisis do not lie entirely in the US.
I thought the Euro’s problems stemmed mostly through making some incredibly bad loans and not so much due to the downturn in the US market, per se. Certainly when the US economy has problems so does the rest of the world, and the down turn in our economy has seriously impacted most other nations.
“Blame” may be a bit too loaded a term; note that I didn’t use it. Think of it rather as effects and incentives. Decisions by the Chinese government had economic effects in the United States that created incentives for many US banks, investors, mortgage-holders etc. to make economic choices that they now regret. In other words, if borrowing is made cheaper, people are likely to borrow more. Likewise, decisions by the Fed and US banks had effects that created incentives for some Canadians to make economic choices that they may now regret.
sailor, what the hell? Earlier in this thread you yourself said that the economies of the world are tightly linked, and that’s all I’m saying too. Think of it this way: Is it reasonable to believe that the flood of Chinese money into the US over the last however many years came out of nowhere? And had no effects?
The chinese banks, government, corprates, pension funds, mutual fundd, etc did NOT load up sub prime related radioactive waste. Lehman’s and every other stupid sss bank in trouble is because they loaded up on tens of biillions of dollars of proprietary trading positions and died when the bubble/greatest ponzi scheme in the history of mankind collapsed.
trying to blame this on the chinese buying treasuries just stretches way beyond the pale.