Left News and Views

CAN THE GLOBAL ECONOMY BE SAVED BY A NEW GLOBAL ECONOMIC ORDER?

Each week the global economic crisis worsens as trillions of dollars are wiped off the world’s equity markets. What will the current economic crisis mean for the average person, and how it will reshape the geo-political landscape of the world?

The current financial crisis will result in the end of the Anglo-American dominance of the world, and a time of total economic collapse of these nations.

The current financial crisis continues to worsen in spite of desperate efforts of governments around the world to prop up failing financial institutions. So far, over three trillion dollars have been spent around the world by governments without any apparent benefit. Where has this money come from and where has it gone?

Much of this new funding has come from the creation of credit by central banks expanding the money supply, or in the form of government guarantees. Yet the scale of accumulated debt is such that this new funding has been like a drop in the bucket, and is having little effect. The outcome of these efforts will be increased inflation and further weakening of currencies with large current account deficits.

The present free-market capitalistic system has been built on an ever expanding mountain of debt. President Bush has been attempting to defend this failed economic system, but this is receiving little support from other nations which can now clearly see that a debt based economy is one of the major causes of the current economic crisis. Replacing the free-market economics model will result in the end of America’s dominance of the global economy.

One of the reasons why the world faces its current difficulties is that for years the Governments have issued bonds, or created credit to finance the wish-list of politicians, thus increasing the money supply without increasing the productive output of their countries. The increase in liquidity has allowed currency speculators, futures traders, hedge and mutual fund managers to have access to easy credit, leveraging their portfolios with debt to finance speculative investments. Consumers borrow to finance the purchase of houses and consumer goods. The English-speaking world has been living on borrowed money and borrowed time for years - now, it’s payback time.

Most debt is secured through perceived assets valued at previous market prices, whether it is shares, corporate debentures or houses. However, the value of these assets that the markets are prepared to pay has collapsed. At present, many who have accumulated debt are being required to repay, but are unable to realize their assets at their original valuation. In order to pay off this debt, they are now forced to sell these assets in a market where there are a few buyers, forcing down the value of the equities used as collateral for loans. This is driving down the value of assets from commodities to shares and property worldwide. It is also leaving the lending institutions with weakened balance sheets as the value of their assets diminishes and their non-performing loans (defaults) increase.

Many Governments around the world have guaranteed deposits held by bankers to prevent depositors withdrawing their money. Governments are now prepared to lend directly to corporations to provide funds so that their stock may continue trading based on propped up equity. The money supply has been expanded through the banking system to try to encourage debt-laden consumers to borrow even more to stimulate domestic demand. Nothing has worked. Governments have taken on these enormous obligations at considerable risk to the taxpayer. If governments are unable to continue servicing the liquidity needs of these corporations and default on their loans, we will see a chain reaction of governments going bankrupt as happened to Argentina between 1999 and 2002. There will also be a chain reaction of bankruptcies dragging the entire global economy into insolvency.

Already we have countries such as Iceland, Hungary, Ukraine, Pakistan and others facing insolvency. A chain reaction of national bankruptcies will spread throughout the world creating economic chaos. Many nations have borrowed in yen, Euros or dollars and are now experiencing difficulties repaying their debts in these currencies now that their own currencies have fallen in arbitrage against the global system of inter-currency flotation. Institutions such as the IMF, the World Bank and the Bank of International Settlements (BIS) are not equipped to bail out nations on a scale that will be required should the global economy collapse, and could be in danger of collapsing themselves.

At present, Governments around the world are holding emergency crisis meetings on how to save the global economy from total collapse. The EU is proposing a new global economic order, where a new institution will replace the Bretton Woods model, which has so favoured the Anglo-Saxon nations. The new global economic order needs to be quickly adopted to replace the collapsing monetary system that has existed for the last 64 years. While only the outline of this new lnstitution’s functional necessities has been announced by French President Nicolas Sarkozy, and will be discussed further at the global economic summit in Washington in November; it is clear that the world’s monetary system will need major reform to provide a structure that will ensure the availability of the necessary capital to properly finance the movement of goods and services. As the French President (the current EU President) has outlined, the existing institutions (BIS, IMF and World Bank) are not equipped to handle a situation of the magnitude of the present crisis. See:

http://news.bbc.co.uk/1/hi/business/7677486.stm

What will emerge from this crisis is a new, global central bank that will have the authority to issue currency and regulate international markets. The new EU based institution will coordinate with Asian countries holding trillions of dollars in reserves to provide the funding to allow world trade to function. Many of the so-called freedoms allowed under the U.S. promoted “free-market capitalism” will be regulated so that no-longer will capital be used for speculative ventures such as futures, currency and commodity speculation. The flow of capital will be controlled in a regulated market, to serve the needs of the State rather than the individual. It appears that the National Socialism model will be introduced, where the movement of capital will be directed by the State. These economic policies proved to be very successful in Germany under Hitler, allowing Germany to quickly recover from the depression of the thirties.

The debt-ridden Anglo-Saxon nations’ economies will collapse with the introduction of this new economic order. No longer will the USA will be able to print and borrow money to finance its deficits, domestic consummation and wars. Wide-spread corporate failure will occur, along with a chain-reaction of bankruptcies. Unemployment will sky-rocket. The dollar will no longer be accepted as the world’s reserve currency, replaced by the Euro and backed by the new global central bank. The English speaking world will disintegrate into anarchy, its people into abject poverty where famine, disease and starvation will prevail.

The new EU controlled Central Bank will have far more authority to regulate the global economy than exists today. In alliance with the Asian countries, it will rebuild a new economic order that will bring prosperity to all nations that submit to its authority.

Many economists have been surprised by the recent strength of the US dollar against the Euro. This is only a temporary phenomenon as US corporate and financial institutions unload foreign assets to bring funds back to the USA to shore up their balance sheets. It will not take some major set-back for the USA, such as war with Iran, for the situation to change and a global sell-off of the USA dollar will occur. This may not happen till the new Global Central Bank is formed, but when it does it will be sudden and dramatic. It will result in total economic collapse for the USA and the English-speaking world.

The events now unfolding have been foretold in the Book of Revelation. In Chapter 13 it tells of a time when there will emerge a new world leader that will install a new economic order that will restore the world, for a short time, to great prosperity. Unfortunately, this will not include the Anglo-Saxon nations which will come under the control of this new global economic order. Their economies will collapse - their people will be subjected to a time of great suffering and poverty, as they will be enslaved to this new global super-power.

The events that will unfold over the coming months will be some of the most dramatic in the history of mankind.

Bruce Porteous

26 October, 2008

bruceport@xtra.co.nz