7 The Empire is Striking Back, gross failure continues to be handsomely rewarded. That the Empire has struck back there is no doubt. Goldman Sachs’ Lloyd C. Blankfein just rewarded himself with $19 million bonus for 2010: the year during which he appeared in front of a Senate Committee, a court , an SEC investigation revealing in full technicolor the great variety in which GS broke the law, manipulated markets and even defrauded its clients.
And in a bid to make this bonus seem positively reasonable, Transocean, the offshore drilling firm responsible for running the Deepwater Horizon rig in the Gulf of Mexico, has awarded large bonuses to its top executives. Guess what for: For its “best year” for safety. Granted that the Minotaur’s Handmaidens (see here, here and here) are back with a vengeance, what can we say about a world in which the Global Minotaur has perished while its Handmaidens are wreaking havoc? Will the global economy manage to find a new balance? Or are we in for a period of permanent crisis? Chapter 9: A Future without the Minotaur? History’s actors. 6 Minotaur Legacy, Part E – The rise of China. In today’s post I conlcude the region-by-region assessment of the impact of the Global Minotaur’s demise post-2008.
Previsously, we delved into the triangular relationship between Japan, East Asia and the USA, recalled Germany’s peculiar engagement with the rest of Europe (see here) and, lastly, re-visited the eurozone crisis. The Dragon soars, then plunges into angst On 4th December 2010, Wikileaks posted an official cable relating a conversation (circa 28th March 2009) between US Secretary of State Hillary Clinton and Australian Prime Minister Kevin Rudd. In it we read: The Secretary also noted the challenges posed by China’s economic rise, asking, “How do you deal toughly with your banker?” The reader may, understandably, protest a startling omission in this book: While promising to speak to the future of the world economy, there has been almost no mention of China. Deng Xiao Ping’s new course for China was modelled on Japan and the South East Asian tigers.
Possibly. America’s bankers. 5 Minotaur Legacy, Part D – A brief history of a very European debacle. The region by region assessment of the impact of the Global Minotaur’s demise post-2008 today proceeds to an analysis of the eurozone crisis. Having just looked at the story of Germany’s European engagement (see here), and after having scrutinised the triangular relationship between Japan, East Asia and the USA), we are (I hope) ready for a re-consideration of the current European conundrum. First as history then as farce: Europe’s bank bail outs Despite European gloating that the Crash of 2008 was an Anglo-Celtic crisis, and that its own banks had not been taken over by financialisation’s equivalent to a gold fever, the truth soon came out.
German banks were caught with an average leverage ratio of €52 borrowed to every €1 of own funds; a ratio worse even than that raked up by Wall Street or London’s City. Within this institutionally problematic framework, the ECB and the European Commission struggled to contain the banking crisis. Greeks bearing debts Like this: Like Loading...
4 Minotaur Legacy, Part C – Germany’s Europe. The region by region assessment of the impact of the Global Minotaur’s demise post-2008 continues in today’s post with a close look at Germany and its attempt to remould Europe in its image. (The last posts looked at developments in the triangular relationship between Japan, East Asia and the USA). It is now appropriate to turn to the Global Plan‘s second pillar: Germany and its mixed fortunes during the Age of the Minotaur, and beyond. The difference with Japan was this: In trying to shield its own export-led growth from the post-1971 dollar devaluation, Germany had something that Japan lacked: access to its own vital space; a space that the United States had previously laboured so hard to create on Germany’s behalf: the European Common Market, i.e. today’s European Union (EU).
Nevertheless, Germany was not Europe’s locomotive. Much ink has been expended in recent years to discuss Europe’s fundamental heterogeneity. But how could it be otherwise? Is the dollar zone homogenous? 3 Minotaur Legacy Part B – Wounded tigers: Japan, America and the South East Asian crisis. 2 Minotaur Legacy, Part A: The Dimming Sun.
On 25th March, European leaders have promised us a comprehensive solution to the eurozone risis. I am not holding my breath but, at the same time, I am redrafting the Modest Proposal for resolving the crisis. It will appear in this blog next week. In the meantime, I return to my Global Minotaur theme. The last post ended with an assessment of the Crash of 2008 and its creation of a new regime: Bankruptocracy. Today I embark on a region by region assessment. The dimming sun: Japan’s lost decades As a pillar of the Global Plan, and under the loving patronage of the United States, Japan’s export-led post-war growth was nothing short of miraculous.
Japanese wages rose throughout the post-war period but never as fast as growth and productivity. Production was based on large scale capital investments yielding impressive economies of scale. Of course, Japan entered into its path of long decline in the 1990s. On 22nd September 1985, the United States, Japan, W. Like this: Like Loading... 1 So, why did the Crash of 2008 happen? A first glimpse of the Global Minotaur.
Regular visitors will know that these days I am deeply immersed in the writing of a book about the Crash of 2008 and its after math. One that will bear the title THE GLOBAL MINOTAUR: America, the True Origins of the Financial Crisis and the Future of the World Economy. Well, I just finished a couple of chapters, which is small beer given than the whole damned thing must be finished by the end of the month… Anyhow, here is an extract from the introductory chapter: Coming to terms with the Crash of 2008 is like coming face to face with the Parallax Challenge at its most demanding. Who could credibly deny that economists and risk managers miscalculated systemic risk big time?
Just like in a simple optical parallax all perspectives are equally plausible depending on one’s standpoint, here too each of the explanations listed above illuminates important aspects of what happened in 2008. Powered by America’s twin deficits, the world’s leading surplus economies (e.g. The Cretan Minotaur. 0 The Global Minotaur is finished… Regulars of this blog will know that 31st January 2011 was my deadline for finishing my new book, THE GLOBAL MINOTAUR: America, the True Oirigns of the Financial Crisis, and the Future of the World Economy. Well, I missed my deadline.
By two hours and thirty six minutes! As deadline misses come, it was not a bad one. While still in a state of euphoria, for having defeated my beast, I thought it appopriate to post some extracts. Those of you who know nothing about my Minotaur, might as well begin at the beginning. In this, earlier, post I explain what the Minotaur symbolises and why its allegorical power can throw light on our current travails. Prelude: The Global Minotaur’s glittering triumph In the aftermath of the Crash of 1929, the world understood that, in a time of Crisis, the state (the Fed and the Treasury) must step in as the lender of last resort.
While its supremacy held sway, the Global Minotaur performed the duties its minders had planned for it to perfection.