Recovery

The announcement of the plans released by the US Treasury Secretary, Tim Geithner seems to have excited the market in Wall Street. The main indexes rose by 6% whilst the banks roared ahead by 15%.

The fundamental underpinning of the plan is that America is committing $1 trillion to buy huge amounts of toxic debt. The idea behind this is that this will unplug the capital markets and credit will again be available in a more normal manner. Like it used to be. But the sad fact is that it isn’t going to ever be quite like it was before.

As the American housing market seems to be picking up a bit, and a chink of sunlight is soothing the incipient panic in the US banking sector the German GDP is expected to fall between 6 to 7% during this year. China is taking progressively more defensive measures and the eastern European countries, formerly part of the Soviet bloc are on the edge of the financial precipice.

No one knows how our collective vulnerability will show itself next. Will the bigger economies have to bail out more of the second and third world countries, and do they have the firepower to do so?

The new emperors of the universe come from Asia and Arabia but it is a very flawed power.

The Chinese continue to live with a paradox. A relatively capitalist economy that is centrally managed by an underlying Soviet type politburo be it political or military. Their controlling fingers are in every pie. But now the global economy is in chaos at precisely the moment China is about to assert itself as a superpower. Is it tenable for China to keep the lid on personal and political freedom whilst energizing and possibly liberalizing their economy and that of the world around them?

There must be a huge temptation for the fairly geriatric Chinese leadership to totally withdraw from the international disaster. However there must be an even more compelling temptation to use the country’s huge reserves for maximum strategic leverage. Will China tear itself apart because of the contradictions of its system or survive and go on to become the pre-eminent global superpower?

The oil rich Arab countries wealth is almost entirely due to their oil revenues and reserves. This is not a sound basis for long-term stability. At present these countries desperately need to create structure and broaden their resources.

As I have written before, you write America off at your peril. But the first shoots of recovery are still a very long way in the distance.

But it has become obvious that the old order is dead and will never come back.