It was a week of dramatic words and far more dramatic gestures. As the United States Congress debated, then vetoed, then revised and finally passed a $700 billion plan to bail out the nation’s troubled banks, stock markets around the world rose and then fell in what may really be described as a roller coaster game. The Dow Jones recorded its biggest loss in some two decades before plugging much of the hole, only to drop and rise again each day of the week as Treasury Secretary Henry Paulson’s plan merged into Congress. Among lenders, paranoia reigns. High interbank lending rates underplayed by the fact that after weeks of bad financial news no one knows who is the holder of the next basket of explosive assets. Individual investors have been gripped by the siege mentality. The usual queues of limousines formed outside London’s posh Savoy Square were outnumbered by queues of customers inside, piling up at a gold money changer with stacks of cash to exchange for bullion. Many of them agree to pay an ounce up to $100 above market prices in order to walk away with the precious metal in their hands. The demand is almost greater than the supply.
“At least it’s a safe bet,” says one buyer. “I mean, what are these banks doing with our money?” Individual investors have been gripped by the siege mentality. The usual queues of limousines formed outside London’s posh Savoy Square were outnumbered by queues of customers inside, piling up at a gold money changer with stacks of cash to exchange for bullion. Many of them agree to pay an ounce up to $100 above market prices in order to walk away with the precious metal in their hands. The demand is almost greater than the supply. “At least it’s a safe bet,” says one buyer. “I mean, what are these banks doing with our money?” Individual investors have been gripped by the siege mentality. The usual queues of limousines formed outside London’s posh Savoy Square were outnumbered by queues of customers inside, piling up at a gold money changer with stacks of cash to exchange for bullion. Many of them agree to pay an ounce up to $100 above market prices in order to walk away with the precious metal in their hands. The demand is almost greater than the supply. “At least it’s a safe bet,” says one buyer. “I mean, what are these banks doing with our money?” piling up in a gold exchange office with stacks of cash to exchange for bullion.
Many of them agree to pay an ounce up to $100 above market prices in order to walk away with the precious metal in their hands. The demand is almost greater than the supply. “At least it’s a safe bet,” says one buyer. “I mean, what are these banks doing with our money?” piling up in a gold exchange office with stacks of cash to exchange for bullion. Many of them agree to pay an ounce up to $100 above market prices in order to walk away with the precious metal in their hands. The demand is almost greater than the supply. “At least it’s a safe bet,” says one buyer. “I mean, what are these banks doing with our money?”This is the question everyone is asking. And more and more, it is not just the solvency of the banks that is called into question, but the entire Anglo-Saxon capitalist system. Three decades of conventional economic wisdom said the markets were supposed to know best, but as politicians across the United States outraged the public at the knowledge that over $3 trillion of their hard-earned money was going to be used to bail out prodigal masters of the world who seemed to have created nothing in reality in terms of real value (in truth they lost everything), it was clear that the phrase that “what’s good for Wall Street is also good for the main street” is no longer relevant.
Now, as the influence of the Reagan-Thatcher ideology diminishes, it feels like a line has been crossed. -we are leaving the glorious era of free markets, easy credit, high risk business, and big paydays, to enter a new life of scarce money, more regulation, less speculation and more government intervention in the markets. Politicians around the world, eager to reassert themselves, are calling for new regulations and the “reform” of the financial system. Meanwhile authoritarian capitalist states like China, alongside social democratic nations like Germany and France, have greeted the crisis with an attitude somewhere between relief and “I told you so.” Both feared the Anglo Saxon model, albeit for different reasons. The fall of Wall Street means that their own models could not only survive, but also flourish.
In France, President Sarkozy is planning a global forum “to rethink capitalism,” stating that “the legitimacy of public powers to intervene in the functioning of the financial system is no longer in question. Angela Merkel of Germany remarked last week, “A few years ago it was fashionable to say that governments would always be weaker in a globalized system. I have never shared this opinion. She added that it was the Americans and the British who rejected her calls for greater regulation.
finance at the last G8 summit. Its finance minister, Peer Steinbrück, went a step further, to say that the crisis would spell “the end of America as a financial superpower.” It’s a sentiment that will no doubt get applause in Russia, where Putin is busy blaming “American contagion” for his market’s troubles, and in Latin America, where heads of state from Hugo Chavez to Cristina Fernández de Kirchner and Evo Morales declare neoliberalism DOA. “The American economic model is at the end of its life,” declared Ecuador’s Rafael Correa last week.
Certainly, there is no doubt surrounding the fall of Wall Street. But beyond that there is an acknowledgment, even from many prominent players within the financial community, that things had indeed gone too far. “At a fundamental level, as the globalization model of deregulation exploded, and that’s what caused the current crisis,” says investor and philanthropist George Soros, one of the very first to ring the bell of alarm about the dangers of complex “mobilization” of almost everything from mortgages to credit card bills. “We are now at the end of this ideology. The future, says Soros, will be “less letting go, less aggressively speculative, less powerful, and tighter on credit.”
