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What links Europe's troubles with America's?

#1HadriPosted 7/28/2011 7:48:26 PM
I'm sure people on the American right love to look at Europe and say socialism has failed, but it's not like we're doing so well ourselves. I'm of the opinion that it's far too simple to say Europe=socialist and America=capitalist, but still:

Obviously the financial crisis is global because one hurting economy hurts all the others thanks to globalization. But I'm wonder if there is nevertheless a common factor in our troubles? it seems to me the crises in Europe are from governments overextending their assets, and while America has also done this, the big contributor to the crisis here was banking institutions' poor judgement under a lack of government oversight.

Is there a common factor here; a way that all these western countries despite being different from one another have mismanaged things in a similar way? It seems to me that someone is not holding up their end of the economic system. There are inherently unstable practices being introduced to economics that make a few people lots of short term money but are not good for nation states.

Maybe wealthy pe- i mean, "Job creators" think nation states are passe when you can afford cars and jets and apartments in all of them?
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#2Magus1947Posted 7/28/2011 7:58:51 PM
There are inherently unstable practices being introduced to economics that make a few people lots of short term money but are not good for nation states.

You seem to be thinking along the same lines of a European conservative.

http://www.telegraph.co.uk/news/politics/8655106/Im-starting-to-think-that-the-Left-might-actually-be-right.html

The rich run a global system that allows them to accumulate capital and pay the lowest possible price for labour. The freedom that results applies only to them. The many simply have to work harder, in conditions that grow ever more insecure, to enrich the few. Democratic politics, which purports to enrich the many, is actually in the pocket of those bankers, media barons and other moguls who run and own everything.
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In the corrupted currents of this world, offence's gilded hand may shove by justice, and oft 'tis seen the wicked prize itself buys out the law
#3Saber_TigerPosted 7/28/2011 8:00:47 PM
At the risk of sounding vague, policies to facilitate the well being of tens or hundreds of millions of people must be adjusted and fine tuned over the years and decades, and the best path to take isn't clear always until there is a problem. To craft a crude analogy referencing another governmental duty, its like maintaining the streets, as you don't know which ones to fix or how much concrete to pour until a crack or pot hole emerges.

One reason why I have respect and admiration for the governments of the U.S., Canada, and Europe, crafting and maintaining a developed state isn't easy, and requires a huge amount of micromanagement , technocratic expertise, and guessing.
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#4Blink of an eyePosted 7/28/2011 8:08:16 PM(edited)
Obviously the financial crisis is global because one hurting economy hurts all the others thanks to globalization. But I'm wonder if there is nevertheless a common factor in our troubles?

I'm not exactly sure if this is what you mean, but much of the issue stems from the fact that the entire global marketplace is dependent on not only the dollar as it's default currency, but US Treasuries as the major source of non-risk liquidity. So naturally anything that happens here will have vast international implications.

it seems to me the crises in Europe are from governments overextending their assets, and while [in] America [...] the big contributor to the crisis here was banking institutions' poor judgement under a lack of government oversight.

The problems are the same. A lot of recent problems stem from -as you said- unregulated banking with regards to derivatives. The derivatives market has exploded over the last decade, it's now almost 5x the size of all stock/bond/equity markets worldwide combined. It's larger than the world economy. The problem with this is derivatives are (relatively) new investment instruments that few fully understand. Because of this, Goldman Sachs was able to "hide" a lot of Greek's debt through leveraging. That's exactly what happened with the mortgage swap/credit crisis here in the United States. The value of the underlying (be it Greece's debt or Crappy mortgages) can be hidden through numerous trenching techniques to the point where it's being bought and sold, but nobody knows exactly what it is. Once people finally realize what they're buying and selling isn't nearly as stable/riskless as they thought it was, they panic and that entire system collapses upon itself in a self-enforcing cycle, drying up all liquidity which further hurts the problem.

Both Europe's as well as out problems could have been avoided with sound, less risky investment on the parts of banks as well as governments.
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#5Magus1947Posted 7/28/2011 8:12:07 PM
Super Saber Tiger posted...
At the risk of sounding vague, policies to facilitate the well being of tens or hundreds of millions of people must be adjusted and fine tuned over the years and decades, and the best path to take isn't clear always until there is a problem. To craft a crude analogy referencing another governmental duty, its like maintaining the streets, as you don't know which ones to fix or how much concrete to pour until a crack or pot hole emerges.

One reason why I have respect and admiration for the governments of the U.S., Canada, and Europe, crafting and maintaining a developed state isn't easy, and requires a huge amount of micromanagement , technocratic expertise, and guessing.


You are like the most upbeat person on the face of the Earth. One of these days you're going to just start posting the lyrics to "Tomorrow" from Annie.
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In the corrupted currents of this world, offence's gilded hand may shove by justice, and oft 'tis seen the wicked prize itself buys out the law
#6Hadri(Topic Creator)Posted 7/28/2011 8:26:07 PM(edited)
I'm not exactly sure if this is what you mean, but much of the issue stems from the fact that the entire global marketplace is dependent on not only the dollar as it's default currency, but US Treasuries as the major source of non-risk liquidity. So naturally anything that happens here will have vast international implications.

Right, but European countries were engaging in poor practices that would have lead to problems later no matter what happened in the US, not to mention their experiment with the Euro.

Anyway thanks for the responses anyone. I'm not a conspiracy theorist in the sense that i don't give these people the foresight to actually have a huge evil plot to arrange all this since it doesn't seem in their nature, nor does it seem yesterday. I still wonder where I fit into this plan, though. Is my purpose as an American middle class male to accrue debt for an education for one skilled corporate job or another so I can accrue more debt buying a car, mortgaging a house and saving for my retirement using their banking system, watching movies that reinforce the idea that I'm living the desirable American Dream, and voting for a government that protects them no matter what?

Gosh, I sound like such a radical. it's not actually that personal to me. What I'm really wondering is whether this is a peculiar phase of global economics that will come to an end by crashing down spectacularly and a new order taking its place, as usual.
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Fight the orbits as they drive us
#7Saber_TigerPosted 7/28/2011 8:26:02 PM
You are like the most upbeat person on the face of the Earth

Thanks. I try to be. I figure there will be plenty of time for tears later in my life, so no need to manufacture them when I am young, healthy, and live in such an amazing and vibrant planet.
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#8Blink of an eyePosted 7/28/2011 8:28:38 PM
Hadri posted...
What I'm really wondering is whether this is a peculiar phase of global economics that will come to an end by crashing down spectacularly and a new order taking its place, as usual.

I don't think so. I imagine -using Super Saber Tiger's analogy- we'll fix the pothole and move on. You'll probably see less deficit spending, more regulations on the derivatives market, and more diversification that doesn't involve the dollar or US bonds. All will be well until the next "oh crap, look what we did moment".
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#9Hadri(Topic Creator)Posted 7/28/2011 8:41:14 PM
I don't think so. I imagine -using Super Saber Tiger's analogy- we'll fix the pothole and move on. You'll probably see less deficit spending, more regulations on the derivatives market, and more diversification that doesn't involve the dollar or US bonds. All will be well until the next "oh crap, look what we did moment".

Most likely. I didn't say it would happen now; though on the other hand, a debt default could be a permanent step for the United States on a path to irrelevance. It's impossible to know now. I'm just saying that when grand systems or aspirations or mere greed go too far, or a powerful new technology changes the dynamic of things, the whole power structure of the world changes. Seemingly small decisions can lead to a multiplicity of consequences after a few hundred years of history.

I read Magus's article. My guess is that after years of being told what they're entitled to, Westerns will demand their democracies to start working for them again. If they make the mistake of refusing it won't be pretty, so they probably will. Some people tell me my generation is complacent, which has been true so far. But what happens if American men like me turn 30 and can't get jobs that can buy them a car, a house, and marriage?
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Fight the orbits as they drive us