Let's say, for the moment, that the US Treasury, the Fed and their European counterparts have fired a shot across the bow: we will not let our financial institutions go under without a fight. By stepping up with what is essentially an unlimited guarantee of broad swaths of the financial sector, Western governments are hoping that both consumer and inter-bank confidence will be rebuilt such that a complete market melt-down and economic ice age is abated. As noted yesterday, there remain many, many unanswered questions but at least our Administration has gotten off the dime and done something.
What really concerns me, beyond the specifics of the US plan and my deep belief in the necessity of a full Good Bank/Bad Bank restructuring, are the repercussions of a global economic slow-down. Russia has been crushed, and barring some miraculous surge in demand, oil prices may well continue to trend lower. This would not bode well for a country that has pumped its way to solvency only to squander its valuable currency yet again. Such turmoil makes for a very restless, irritable populace and perhaps an even more volatile, centralized leadership structure. An unstable Russia is good for nobody.
China, while licking its wounds after its markets have gotten shellacked, has multiple avenues for growth even in a weakened global economy. It could potentially turn inward in order to keep its economic engines going. It could, say, build a massive, 21st century nuclear-powered Navy. This could keep millions employed. It could continue to invest in large public-works projects in order to keep people employed during the global chill, to keep its citizenry peaceful and docile and to lay the foundation for an even more powerful position on the global stage during the next economic up-cycle. China has options, some of which can help the world while others could reinforce its expanded military desires at a time of global instability. This doesn't make me feel particularly well, either.
Are we looking at the 1930s all over again? Could economic turmoil sow the seeds of discontent and lead to the formation of a hostile regime that garners tremendous grass-roots support? I don't know, but the possibilities are scary. If there is one thing that both US leadership and their foreign counterparts should remember is that like it or not, we are more tightly coupled than ever. Economically. Socially. Culturally. The flattening of the world and the free-flowing of goods and services has really created a global citizenry, a group that may be suspicious of those from other locales but who also likes to wear their jeans, listen to their music and tap into their YouTube videos.
Like it or not, we are all in this thing together and our motives have never been more aligned than they are today. Let's hope our leaders keep this in the forefront of their minds as the global unrest unfolds. Because the US, as a sovereign power, no longer has the ability to act unilaterally and get stuff done. We need help. As does everybody else. So let's help each other, for the good of our own countries and the planet.