The more intelligent have been warning for years that this collapse
was inevitable and some have cut their cloth accordingly . To have
run up debts solely to indulge in wasteful current expenditure ran
contrary to everything the pre-war generations took for the gospel
truth - that debt was a millstone to be expunged as soon as possible.
To those who preached this gospel the response usually was "Oh Get
with it! We live in a new world now!"
Well we've gone back to the old one now. It's not a 'new world'; it
is the old world of sound commonsense reestablishing itself but with
new players
xxxxxxxxxxxx cs
===========================
DAILY MAIL 20.9.08
Apocalypse Now?: New world order could have devastating implications
for Western nations
Peter Oborne
Almost exactly seven years ago Al Qaeda terrorists targeted their
hijacked planes into the Twin Towers at the heart of New York's
financial centre - and the world was transformed.
There were no deaths this week, but the effects of the carnage on the
financial markets will be far more profound and destabilising than
the 9/11 atrocity.
For almost all of us, it will, I predict, be a change for the worse,
and for a large minority the consequences will be extremely distressing.
The Western world - Britain, Europe and the U.S. - has moved from
excess to austerity overnight. This week's financial typhoon will
savagely impact living standards.
In due course, it will topple governments and lead to a permanent transfer
of economic and political power from Europe and America to the emergent and,
in some cases, such as China, semi-barbarous economies in the East.
I know I will be accused of being unnecessarily apocalyptic and
irresponsibly negative, but I believe that the greatest mistake we
can now make is to downplay the seriousness of the situation and bury
our heads in the sand.
The seismic events which have seen the near-destruction of the
investment banking sector and the collapse of insurance giant AIG are
on the scale of the Great Crash of 1929.
I know I will be accused of being unnecessarily apocalyptic and
irresponsibly negative, but I believe that the greatest mistake we
can now make is to downplay the seriousness of the situation and bury
our heads in the sand.
The seismic events which have seen the near-destruction of the
investment banking sector and the collapse of insurance giant AIG are
on the scale of the Great Crash of 1929.
That was such a disaster because it created conditions for the emergence of
fascism in continental Europe and then World War II.
Although it is hard to predict the consequences, we should expect
ramifications of equal significance - including the re-emergence of
violent Far Right parties across the globe.
Some experts were talking this week as if the financial crisis was
nearly over. They could not be more wrong. The downturn has only just
begun - and for most citizens uninvolved with finance the
consequences have not been felt at all.
But they will be felt very soon and very brutally. The British
economy is in the same position as the Texan coast earlier this month
as Hurricane Ike approached - apparently calm, with life going on as
normal, but an almighty storm is raging just over the horizon and
heading our way with terrifying speed.
We can expect a sharp increase in personal bankruptcies. Yet the
numbers will not peak until this time next year at the earliest.
Hundreds of thousands of people will lose their jobs, with many
forced to sell their houses. Property prices will slump.
There will be extreme human suffering, panic and despair. Many
careers will be destroyed. This is considerably worse than the
downturn of the early 1990s.
The orthodoxy from the British Government, the Confederation of
British Industry and elsewhere that there will be a mild slowdown
ending late next year is nonsense.
This crisis is vicious, dynamic and only just beginning.
Even those of us lucky enough not to lose our jobs and our homes will
have friends and relatives who do.
Let us examine, first, the fate of City bankers from firms such as
Lehman Brothers - all summarily dismissed when their firm went under
this week.
They will receive no severance payment and almost no chance ever
again of benefiting from the six-figure salaries and massive bonuses
they have taken for granted over the past few years.
That means they cannot service the huge mortgages they have taken out
on hugely expensive houses. So this weekend they have become forced
sellers - which means that thousands of new For Sale signs will be
going up in London and the South-East in the coming weeks.
If these unemployed investment bankers had the misfortune to buy
anywhere near the top of the market, they now face the prospect of
personal bankruptcy. This is because they will find that their
houses are worth much less than they paid for them, and will
therefore be unable to repay their loan.
With so many vendors on the market obliged to sell at any price, it
can be assumed that any London house will fetch 25 per cent less this
weekend than it would have done this time last week.
Many of the younger bankers - those in their 20s and 30s with young
families - now face utter disaster.
Of course, there is scant public sympathy for these former 'masters
of the universe' who enjoyed good times. But we already know that
Thursday's merger of Lloyds Bank and HBOS (supposing it
is completed: contrary to statements by Chancellor Alistair Darling,
this is by no means certain) will lead directly to the loss of some
40,000 jobs among bank workers.
There will be bloodletting on every High Street where there is both
an HBOS and Lloyds outlet - one branch will undoubtedly be closed.
But that body-blow is just the start. Over the coming months, the
financial typhoon will mercilessly spread outwards and wreak
devastation on the economy. Banks will foreclose on thousands of
small businesses. Massive corporate failures are inevitable.
These disasters will then rebound on the financial sector, as company
bankruptcies and plunging house prices force fresh balance sheet
write-downs and yet more sackings.
Unemployment - already rising fast and up 80,000 over the summer - is
set to surge ahead and will increase well above the two million
predicted by economists.
This will produce a vicious spiral. Every worker out of a job means
less tax receipts and higher welfare payments.
In last March's Budget (a work of fiction when it was published),
Alistair Darling forecast borrowing this year of £43 billion. Even at
the time, this figure was shockingly large.
It meant that only Egypt, Pakistan and Hungary among significant
world economies had more profligate government spending than Britain.
As of this weekend, Government borrowing is out of control.
It will soar nearer £100 billion next year - more than double
Darling's estimate. This will cast doubt about Britain's ability to
finance our debt in the international credit markets.
The International Monetary Fund has already warned Darling about his
reckless spending. In the months to come, it will demand cuts in
government spending, just as it did in the 1970s when the then Labour
Chancellor, Denis Healey, had to beg for an IMF loan.
Darling will have to take urgent, painful action to reverse the
splurge of recent expenditure - welcomed by financially ignorant
Labour MPs - on public services, in particular health and education.
And whereas the responsible wing of the Labour Government, as it did
in the 1970s, will support this prudence, the Left will call for
extra spending to save jobs.
It is likely that the Labour Party will split on this issue - just as
it did in the aftermath of the Crash in 1931 and again at the start
of the 1980s. In the medium term, the only resolution to this debt
crisis is a rise in inflation, as governments are forced to print
money to fend off depression.
Savers should thus brace themselves for the return of double-digit
price rises not seen since the early 1980s.
Driven by poverty, crime will also soar - particularly crimes against
property. We should also brace ourselves for a return of political
violence to the streets.
Certainly the British National Party will use the economic downturn
to agitate against immigrants, accusing them of having 'stolen
British jobs'. The BNP made some striking gains at last May's
elections, and these will continue in the European elections next June.
This is the troubling prospect we face. But the worldwide
consequences are just as significant and we can expect the Euro to
fail under the strain of economic collapse.
The Euro has never been tested by adversity. The single currency's
architects made one foolish mistake when they set it up ten years
ago: they established monetary union ahead of political union.
In long-established democracies such as Britain and the United
States, it is natural for one area of the country to help the other
in times of difficulty.
For instance, there was no strong objection when taxpayers in the
South were asked to bail out Northern Rock, even though its
operations were concentrated [--- ? IN THE NORTH?]
However, that is not the case in mainland Europe where French
taxpayers would refuse to contribute huge sums to bail out, say, the
Italian banking sector.
That is why the Euro is likely to be destroyed by the coming economic
storm - just as Britain's membership of the European monetary system
was smashed on Black Wednesday 1992.
The truth is that this week's seismic events will come as a crashing
humiliation to the European political class.
Like in Britain, this crisis will be exploited by the Far Right in
countries such as France, Holland and Austria.
These countries have powerful neo-fascist parties which will relish
recession, in particular singling out for blame ethnic minorities,
just as the Nazis did in Germany after the 1929 crash.
The good news is that Britain - despite the efforts of Tony Blair and
others - remains outside the Euro.
It means we can control our interest rates and allow the pound to
depreciate, unlike so many European countries, some of which (such as
Ireland) are already being devoured by recession.
But the biggest worry is what will happen in the U.S. Ever since the
end of World War II, America has been the world's policeman.
It has been able to play this role, and see off perceived enemies,
such as Soviet Russia and Saddam Hussein's Iraq, because for the past
60 years it has been the greatest global economic power.
The most important question facing the world today is whether the
U.S. - already crippled by the estimated $2 trillion cost of
financing the Iraq occupation - can afford to continue its global
role. The historical precedent is far from encouraging.
After the 1929 crash, the U.S. turned in on itself, resorting to
protectionism. It re-engaged with the world only after the attack by
Japan at Pearl Harbour in December 1941.
It is too early to say for sure, but it is possible that America is
at a similar turning point in its history.
President Bush's decision to pour taxpayers' money into so many
bankrupt financial institutions has led to an explosion of U.S.
national debt which will be hugely exacerbated by yesterday's move in
Washington.
As a result, U.S. global creditworthiness is in jeopardy, and it is
likely that at some stage over the next decade the dollar will lose
its unchallenged status as the world's reserve currency.
There are signs that this process has already begun. For this
weakening of the currency was the fate of sterling in the economic
crisis of the 1930s.
Indeed, the subsequent decision to take the pound off the Gold
Standard in 1931 marked the effective end of the British Empire.
Rising power: China has emerged as a threat to US power, and the
recent Beijing Olympics have only added to its stature
America's global dominance - already threatened by the emergence of
rival economic powers such as China - may soon be coming to its end.
The U.S. will probably retreat inwardly, becoming isolationist, at
any rate temporarily - opening the way to a new and even more
menacing global order.
It is inevitable that America will soon withdraw from Iraq, leaving
its bitter enemy, Iran, unchallenged as the dominant regional power.
China will become ever more assertive and will want to humiliate
Washington by seizing control of Taiwan, something the White House
will be powerless to resist. It will move on to threaten nearby India.
Africa will become the scene of proxy wars between China and the
West, just as it was the scene of proxy wars between the United
States and Soviet Russia for much of the post-war period.
China, much to U.S. fury, will also start to meddle in Latin America.
The world that will emerge from the Great Crash of 2008, therefore,
will be dark and unpredictable.
This weekend, all sensible families will go through their finances,
anticipate the inevitable problems that lie ahead, and cut back at
once on unnecessary spending such as eating out, second cars and
foreign holidays.
For the past 25 years we have lived through a glorious party. We
have all [count ME out! cs]- governments, companies, banks and, of
course, consumers - lived beyond our means and are paying the price.
This weekend the hangover begins. It will be prolonged.
Life will be much closer to the austerity that followed World War II
than the frenzied, debt-fuelled boom of the past two decades.
Perhaps our lives will be none the worse for all this. Our values
will certainly change - many will say not before time. Material
objects should count for much less.
Almost overnight we have entered a new world, and we must learn to
make the best of it.
Although it is hard to predict the consequences, we should expect
ramifications of equal significance - including the re-emergence of
violent Far Right parties across the globe.
Some experts were talking this week as if the financial crisis was
nearly over. They could not be more wrong. The downturn has only just
begun - and for most citizens uninvolved with finance the
consequences have not been felt at all.
But they will be felt very soon and very brutally. The British
economy is in the same position as the Texan coast earlier this month
as Hurricane Ike approached - apparently calm, with life going on as
normal, but an almighty storm is raging just over the horizon and
heading our way with terrifying speed.
We can expect a sharp increase in personal bankruptcies. Yet the
numbers will not peak until this time next year at the earliest.
Hundreds of thousands of people will lose their jobs, with many
forced to sell their houses. Property prices will slump.
There will be extreme human suffering, panic and despair. Many
careers will be destroyed. This is considerably worse than the
downturn of the early 1990s.
The orthodoxy from the British Government, the Confederation of
British Industry and elsewhere that there will be a mild slowdown
ending late next year is nonsense.
This crisis is vicious, dynamic and only just beginning.
Even those of us lucky enough not to lose our jobs and our homes will
have friends and relatives who do.
Let us examine, first, the fate of City bankers from firms such as
Lehman Brothers - all summarily dismissed when their firm went under
this week.
They will receive no severance payment and almost no chance ever
again of benefiting from the six-figure salaries and massive bonuses
they have taken for granted over the past few years.
That means they cannot service the huge mortgages they have taken out
on hugely expensive houses. So this weekend they have become forced
sellers - which means that thousands of new For Sale signs will be
going up in London and the South-East in the coming weeks.
If these unemployed investment bankers had the misfortune to buy
anywhere near the top of the market, they now face the prospect of
personal bankruptcy. This is because they will find that their
houses are worth much less than they paid for them, and will
therefore be unable to repay their loan.
With so many vendors on the market obliged to sell at any price, it
can be assumed that any London house will fetch 25 per cent less this
weekend than it would have done this time last week.
Many of the younger bankers - those in their 20s and 30s with young
families - now face utter disaster.
Of course, there is scant public sympathy for these former 'masters
of the universe' who enjoyed good times. But we already know that
Thursday's merger of Lloyds Bank and HBOS (supposing it
is completed: contrary to statements by Chancellor Alistair Darling,
this is by no means certain) will lead directly to the loss of some
40,000 jobs among bank workers.
There will be bloodletting on every High Street where there is both
an HBOS and Lloyds outlet - one branch will undoubtedly be closed.
But that body-blow is just the start. Over the coming months, the
financial typhoon will mercilessly spread outwards and wreak
devastation on the economy. Banks will foreclose on thousands of
small businesses. Massive corporate failures are inevitable.
These disasters will then rebound on the financial sector, as company
bankruptcies and plunging house prices force fresh balance sheet
write-downs and yet more sackings.
Unemployment - already rising fast and up 80,000 over the summer - is
set to surge ahead and will increase well above the two million
predicted by economists.
This will produce a vicious spiral. Every worker out of a job means
less tax receipts and higher welfare payments.
In last March's Budget (a work of fiction when it was published),
Alistair Darling forecast borrowing this year of £43 billion. Even at
the time, this figure was shockingly large.
It meant that only Egypt, Pakistan and Hungary among significant
world economies had more profligate government spending than Britain.
As of this weekend, Government borrowing is out of control.
It will soar nearer £100 billion next year - more than double
Darling's estimate. This will cast doubt about Britain's ability to
finance our debt in the international credit markets.
The International Monetary Fund has already warned Darling about his
reckless spending. In the months to come, it will demand cuts in
government spending, just as it did in the 1970s when the then Labour
Chancellor, Denis Healey, had to beg for an IMF loan.
Darling will have to take urgent, painful action to reverse the
splurge of recent expenditure - welcomed by financially ignorant
Labour MPs - on public services, in particular health and education.
And whereas the responsible wing of the Labour Government, as it did
in the 1970s, will support this prudence, the Left will call for
extra spending to save jobs.
It is likely that the Labour Party will split on this issue - just as
it did in the aftermath of the Crash in 1931 and again at the start
of the 1980s. In the medium term, the only resolution to this debt
crisis is a rise in inflation, as governments are forced to print
money to fend off depression.
Savers should thus brace themselves for the return of double-digit
price rises not seen since the early 1980s.
Driven by poverty, crime will also soar - particularly crimes against
property. We should also brace ourselves for a return of political
violence to the streets.
Certainly the British National Party will use the economic downturn
to agitate against immigrants, accusing them of having 'stolen
British jobs'. The BNP made some striking gains at last May's
elections, and these will continue in the European elections next June.
This is the troubling prospect we face. But the worldwide
consequences are just as significant and we can expect the Euro to
fail under the strain of economic collapse.
The Euro has never been tested by adversity. The single currency's
architects made one foolish mistake when they set it up ten years
ago: they established monetary union ahead of political union.
In long-established democracies such as Britain and the United
States, it is natural for one area of the country to help the other
in times of difficulty.
For instance, there was no strong objection when taxpayers in the
South were asked to bail out Northern Rock, even though its
operations were concentrated [--- ? IN THE NORTH?]
However, that is not the case in mainland Europe where French
taxpayers would refuse to contribute huge sums to bail out, say, the
Italian banking sector.
That is why the Euro is likely to be destroyed by the coming economic
storm - just as Britain's membership of the European monetary system
was smashed on Black Wednesday 1992.
The truth is that this week's seismic events will come as a crashing
humiliation to the European political class.
Like in Britain, this crisis will be exploited by the Far Right in
countries such as France, Holland and Austria.
These countries have powerful neo-fascist parties which will relish
recession, in particular singling out for blame ethnic minorities,
just as the Nazis did in Germany after the 1929 crash.
The good news is that Britain - despite the efforts of Tony Blair and
others - remains outside the Euro.
It means we can control our interest rates and allow the pound to
depreciate, unlike so many European countries, some of which (such as
Ireland) are already being devoured by recession.
But the biggest worry is what will happen in the U.S. Ever since the
end of World War II, America has been the world's policeman.
It has been able to play this role, and see off perceived enemies,
such as Soviet Russia and Saddam Hussein's Iraq, because for the past
60 years it has been the greatest global economic power.
The most important question facing the world today is whether the
U.S. - already crippled by the estimated $2 trillion cost of
financing the Iraq occupation - can afford to continue its global
role. The historical precedent is far from encouraging.
After the 1929 crash, the U.S. turned in on itself, resorting to
protectionism. It re-engaged with the world only after the attack by
Japan at Pearl Harbour in December 1941.
It is too early to say for sure, but it is possible that America is
at a similar turning point in its history.
President Bush's decision to pour taxpayers' money into so many
bankrupt financial institutions has led to an explosion of U.S.
national debt which will be hugely exacerbated by yesterday's move in
Washington.
As a result, U.S. global creditworthiness is in jeopardy, and it is
likely that at some stage over the next decade the dollar will lose
its unchallenged status as the world's reserve currency.
There are signs that this process has already begun. For this
weakening of the currency was the fate of sterling in the economic
crisis of the 1930s.
Indeed, the subsequent decision to take the pound off the Gold
Standard in 1931 marked the effective end of the British Empire.
Rising power: China has emerged as a threat to US power, and the
recent Beijing Olympics have only added to its stature
America's global dominance - already threatened by the emergence of
rival economic powers such as China - may soon be coming to its end.
The U.S. will probably retreat inwardly, becoming isolationist, at
any rate temporarily - opening the way to a new and even more
menacing global order.
It is inevitable that America will soon withdraw from Iraq, leaving
its bitter enemy, Iran, unchallenged as the dominant regional power.
China will become ever more assertive and will want to humiliate
Washington by seizing control of Taiwan, something the White House
will be powerless to resist. It will move on to threaten nearby India.
Africa will become the scene of proxy wars between China and the
West, just as it was the scene of proxy wars between the United
States and Soviet Russia for much of the post-war period.
China, much to U.S. fury, will also start to meddle in Latin America.
The world that will emerge from the Great Crash of 2008, therefore,
will be dark and unpredictable.
This weekend, all sensible families will go through their finances,
anticipate the inevitable problems that lie ahead, and cut back at
once on unnecessary spending such as eating out, second cars and
foreign holidays.
For the past 25 years we have lived through a glorious party. We
have all [count ME out! cs]- governments, companies, banks and, of
course, consumers - lived beyond our means and are paying the price.
This weekend the hangover begins. It will be prolonged.
Life will be much closer to the austerity that followed World War II
than the frenzied, debt-fuelled boom of the past two decades.
Perhaps our lives will be none the worse for all this. Our values
will certainly change - many will say not before time. Material
objects should count for much less.
Almost overnight we have entered a new world, and we must learn to
make the best of it.
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