It is with almost terrifying certainty that another crisis threatens due to the extraordinary measures that have been undertaken to prevent the current problems ballooning into a full system shut down.
Most of this can be traced back to the remarkable phenomena of bubbles, many of which still exist hidden between deep within financial markets. These speculative price illusions will always exist, due to the adeptness of certain firms at inflating the particular value of a specific asset.
This occurs on a day to day basis. Property can have a 10-15 percent price variance based on the value given by a particular market index or estimated review.
Even now this is occurring, as damaged markets try to recover.
For all of the severity of the crisis, and the harm caused to global stocks, banks, property and the gross domestic products of nearly every country in the world, there are still massive amounts of money in the world market.
Or more accurately, and dangerously, still abundant amounts of credit. True, large amounts of it have subsided, mostly due to the fact that banks have become more aware of the inherent risk (especially in interbank trading) but either way, the world’s growth is and always will be supported by the foundation of lent monies.
In essence, this could be traced back to the root of all the problems, as the modern day blur between actual money and credit has blurred.
As a New York businessman (who wished to remain anonymous) said “if it was measured in actual money, I would be close to broke, but in terms of credit, I am one of the richest men in the city!”
Many of the measures in place now throughout the world economy are a deadly combination of low interest rates, low asset prices, and incredible opportunity.
There is also the swing of debt from the private sector to the public sector. It is quite incongruous to think that arguably the chief architects of this crisis in the banking districts are now better off due massive influx of taxpayers moneys. The world’s debt, for so long part of the risk takers and entrepreneurs, now are saddled with the world’s governments.
But there are a lot of prospects in the world for those who know how to look and how to leverage, and many banks will look at excessive risk taking to recoup heavy losses over the last two years.
Some financial markets have made strong gains in the last two or three quarters, and pockets of banks and fund managers have emerged “from the ashes” almost too strongly. Many European and American Central Bank officials have said that the performance of these institutions is against the grain, and show some uncomfortable parallels that were seen prior to previous disasters.
The same resemblances are being seen with some economist’s views of capitalism, stressing that one of the cores of the predominantly western economic system is that it often lends itself to auto-correction.
However, the laissez-faire approach of free market economies was seen as being largely responsible, as organisations ran rampant without any restrictions or impositions from their governments. Now, should not central banks and countries treasuries be reversing modern trend and putting in, dare we say it, slightly communist principles.
After all, those same governments effectively disregarded the basic tenets of “capitalism” when pumping taxpayer’s money into the system to stabilise it, which then meant that governments around the world suddenly had stakes in large portions of the private sector.
Governments all round the world have actively looked to impose some restrictions and measures on businesses, the most dominant being the curbing of executive payments.
But risk taking is inherently part of the free market model and capitalism.
Would the governments have been able to pump trillions of dollars into the markets if they themselves had not profited from the remarkable levels of income that the leading financial institutions had sustained for the years leading into the crisis.
Lest we forget, the world’s economic growth was humming along at an astronomical rate after the dot.com crash.
But now there are so many opportunities, as the “dead shells” of so many businesses and industries represent massive prospects, and despite the fact that the financial system is still recovering, there are trillions of dollars circulating now that weren’t in place before, thanks to government stimulus packages.
The real fear is that as businesses and banks move to rebuild their balance sheets, it is hard to be allayed that they will not (are not) making the same fundamental errors that caused the system meltdown in the first place.
The world we live in now is a credit based economy, and often the measurement and assessment of such credit is based on the value of assets, bonds, shares and the like, which as history has now proven to us, are susceptible to bubbles and inaccurate price portrayals.
The crisis wasn’t so much a crisis as a giant “correction”, and for all of the opportunities and growth afforded by capitalism and a free market mentality, the reality is that it is likely that we will be prone to another such correction in the coming years.
But with governments encumbered with record debt levels, what will be the solution and fix next time round?
Tuesday, December 8, 2009
Friday, December 4, 2009
Has Obama made his first real mistake with the 30,000 troop surge?
President Barack Obama has signed off on an increase of United States soldiers to Afghanistan. In many respects his hands were tied, as it is now firmly part of the American strategy to make some obvious progress in the country.
The reality is that America, under both the Bush and Obama administrations have clearly stated that Afghanistan is the major thorn and threat to the free world.
The triple threat of al-Qaida, the growing strength (audacity?) of the Taliban and the presence of a nuclear armed and unstable government in Pakistan means that the United States yet again has to fight a different style of war.
In essence, it is a variation of the containment doctrine that the United States has followed in previous conflicts. While it is not to prevent the spread of communism as such, again the Americans are taking the security of their own country and the world into their own hands.
Some might mockingly call them the “world’s toughest cop” but again they find themselves doing the dirty work that few if any nations could or would wish to undertake.
Others believe that the United States has a point to prove after effectively losing the Iraq conflict. This though is a matter of opinion, and it is impossible realistically to quantify success in a modern war theatre. The final word on the Iraq conflict might be “well were there ever weapons of mass destruction”, but more prudently one should ask “Is the country and the world a better place for the absence of a certain Saddam Hussein”.
But while it is a vastly different conflict, there are basic comparisons with Afghanistan and Vietnam. Perhaps not with the cause or conflict itself, but in the situation that the United States again finds itself in, struggling to define an exit strategy.
These are not the simple days of World War Two when the mission parameter was essentially to defeat Germany and Japan. These are complex conflicts where the hardest part of the question is how can America confirm that the job is done (if they even know themselves what they are trying to ultimately achieve), and how do you then just up and leave.
Richard Nixon campaigned in 1968 to withdraw from Vietnam in his run to the presidency, but it took years before an effective exit strategy could begin.
The Nixon Doctrine, or Vietnamization, is essentially what America is trying to achieve on two fronts, both in Iraq and Afghanistan. But trying to prepare a country to fend for itself is almost an impossible task. Most of these areas have survived and become dependent on United States support, but the worse and possibly the most ignored lesson in all of this is Afghanistan itself.
It is a country well used to resisting occupying forces.
Throughout history the country has been conquered and subjugated by the Median and Persian Empires. Alexander the Great counted it among his territories, and the Turks and Mongols have ruled over the land.
In modern history, the USSR (nearly 30 years ago) invaded the country, and it was the Afghan Mujahideen that enabled the country to eventually set in motion the Soviets withdrawal in 1988/89.
Ironically they were funded largely by the Americans, but many believe that the United States and their allies did not adequately initiate any form of handover or help the country recover from a damaging ten year war.
As many people left Afghanistan, continuing infighting between Mujahideen and other local factions led to warlords rising and territorial battles. This was a contributing factor to the rise of the Taliban, which led to the Sunni Islamist movement eventually capturing Kabul in 1996, and years later controlled over 90% of the country.
Perhaps America feels as if they themselves spawned the Taliban.
But while al-Qaida and strengthening Pakistan is key; it is the essential removal of the Taliban that will be foremost amongst the United States objectives.
The surge – which had remarkable success in Iraq – will inflate troop numbers to nearly 100,000.
Also, which surprised many, Obama attached a deadline of withdrawal. This has been said by many, especially the Republicans, to be terrible mistake. As an Afghan sympathiser said to a high ranking American official of late “you might have all the watches, but we have all the time.”
With the deadline, the Taliban and insurgents may adopt a mere holding pattern, and patiently wait until the American withdrawal.
This is a United States machine that has as much practical war experience in the last seventy years as any fighting force seen over history. They might make mistakes time to time, but the most heavily funding military power the world has ever seen does have the resources and offensive force to beat this enemy.
But it is not a small mission.
Afghanistan is nearly a quarter of a million miles squared, with a population of nearly 30 million people. Current estimates put the Taliban forces at approximately 25,000-30,000.
As previous conflicts have shown, it is not so much about winning the war, but about putting the parameters in place to ensure that the war effort and billions of US Taxpayers dollars are not wasted if the country descends into strife months or years after American departure.
Is it a mistake on Obama’s part?
Perhaps it is, and there is no mistaking the irony that the current Nobel Prize peace winner has endorsed increased military presence and activity in the country.
But it is a no-win situation at this time. His experts on the ground demanded more troops, and few Presidents openly challenge or ignore the advice coming from the Pentagon.
The key now for Obama in making this commitment is making sure that there is a quantifiable result. That is the big difference in the United States and the Taliban.
The commander in chief has to make sure his constituents are sated, the Taliban warlords do not.
Who will blink first?
The reality is that America, under both the Bush and Obama administrations have clearly stated that Afghanistan is the major thorn and threat to the free world.
The triple threat of al-Qaida, the growing strength (audacity?) of the Taliban and the presence of a nuclear armed and unstable government in Pakistan means that the United States yet again has to fight a different style of war.
In essence, it is a variation of the containment doctrine that the United States has followed in previous conflicts. While it is not to prevent the spread of communism as such, again the Americans are taking the security of their own country and the world into their own hands.
Some might mockingly call them the “world’s toughest cop” but again they find themselves doing the dirty work that few if any nations could or would wish to undertake.
Others believe that the United States has a point to prove after effectively losing the Iraq conflict. This though is a matter of opinion, and it is impossible realistically to quantify success in a modern war theatre. The final word on the Iraq conflict might be “well were there ever weapons of mass destruction”, but more prudently one should ask “Is the country and the world a better place for the absence of a certain Saddam Hussein”.
But while it is a vastly different conflict, there are basic comparisons with Afghanistan and Vietnam. Perhaps not with the cause or conflict itself, but in the situation that the United States again finds itself in, struggling to define an exit strategy.
These are not the simple days of World War Two when the mission parameter was essentially to defeat Germany and Japan. These are complex conflicts where the hardest part of the question is how can America confirm that the job is done (if they even know themselves what they are trying to ultimately achieve), and how do you then just up and leave.
Richard Nixon campaigned in 1968 to withdraw from Vietnam in his run to the presidency, but it took years before an effective exit strategy could begin.
The Nixon Doctrine, or Vietnamization, is essentially what America is trying to achieve on two fronts, both in Iraq and Afghanistan. But trying to prepare a country to fend for itself is almost an impossible task. Most of these areas have survived and become dependent on United States support, but the worse and possibly the most ignored lesson in all of this is Afghanistan itself.
It is a country well used to resisting occupying forces.
Throughout history the country has been conquered and subjugated by the Median and Persian Empires. Alexander the Great counted it among his territories, and the Turks and Mongols have ruled over the land.
In modern history, the USSR (nearly 30 years ago) invaded the country, and it was the Afghan Mujahideen that enabled the country to eventually set in motion the Soviets withdrawal in 1988/89.
Ironically they were funded largely by the Americans, but many believe that the United States and their allies did not adequately initiate any form of handover or help the country recover from a damaging ten year war.
As many people left Afghanistan, continuing infighting between Mujahideen and other local factions led to warlords rising and territorial battles. This was a contributing factor to the rise of the Taliban, which led to the Sunni Islamist movement eventually capturing Kabul in 1996, and years later controlled over 90% of the country.
Perhaps America feels as if they themselves spawned the Taliban.
But while al-Qaida and strengthening Pakistan is key; it is the essential removal of the Taliban that will be foremost amongst the United States objectives.
The surge – which had remarkable success in Iraq – will inflate troop numbers to nearly 100,000.
Also, which surprised many, Obama attached a deadline of withdrawal. This has been said by many, especially the Republicans, to be terrible mistake. As an Afghan sympathiser said to a high ranking American official of late “you might have all the watches, but we have all the time.”
With the deadline, the Taliban and insurgents may adopt a mere holding pattern, and patiently wait until the American withdrawal.
This is a United States machine that has as much practical war experience in the last seventy years as any fighting force seen over history. They might make mistakes time to time, but the most heavily funding military power the world has ever seen does have the resources and offensive force to beat this enemy.
But it is not a small mission.
Afghanistan is nearly a quarter of a million miles squared, with a population of nearly 30 million people. Current estimates put the Taliban forces at approximately 25,000-30,000.
As previous conflicts have shown, it is not so much about winning the war, but about putting the parameters in place to ensure that the war effort and billions of US Taxpayers dollars are not wasted if the country descends into strife months or years after American departure.
Is it a mistake on Obama’s part?
Perhaps it is, and there is no mistaking the irony that the current Nobel Prize peace winner has endorsed increased military presence and activity in the country.
But it is a no-win situation at this time. His experts on the ground demanded more troops, and few Presidents openly challenge or ignore the advice coming from the Pentagon.
The key now for Obama in making this commitment is making sure that there is a quantifiable result. That is the big difference in the United States and the Taliban.
The commander in chief has to make sure his constituents are sated, the Taliban warlords do not.
Who will blink first?
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