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Last Updated: Oct 10, 2008 - 1:00:40 PM |
Firstly, the outcome of the global credit crisis remains far
from certain, as does the status quo of the world's geopolitical
landscape. The diplomatic and political repercussions of the economic
turmoil are assuming unpredictable dimensions. America's long-term
ability to confront the global credit crisis will not be possible
without international coordination, particularly from its European
allies. In addition, America's detractors who may have initially
rejoiced at the status quo cannot afford to go at it alone in
conjunction with other like-minded anti-US countries. The global
economy is too intertwined for geopolitical blocs to merge in
opposition to each other. Time is of the essence. Failure to cooperate
internationally and place ideology aside will have devastating
consequences for all. Change is inevitable and will come, but not as
Mr. McCain or Mr. Obama envision or pretend to envision. It will be
determined by forces beyond their control.
Outside the U.S., Europe has been most directly affected by the
financial turbulence presenting another challenge to European unity,
which was last tested during the Russia-Georgia crisis. With France as
head of the rotating EU Presidency, Mr. Sarkozy once again seized the
initiative. In August, he secured the cease-fire between Russia and
Georgia but he is currently struggling to achieve a comprehensive
European-wide consensus to deal with the turmoil. His attempt to create
a European common financial pool to bail out distressed European banks
was rejected by the United Kingdom and Germany. However, greater
coordination among EU states is inevitable is occurring by necessity
and not choice. Mr. Sarkozy's conciliatory call for a more "civilized
capitalism" is more welcome than rhetoric from Germany's Foreign
Minister Steinmeyer, who noted the crisis marks the end of American
global economic dominance.
As leader of Germany's Socialists for the 2009 election, Mr. Steinmeyer
will seize every possible opportunity to placate his party's grassroots
which rejoice at the distressed state of Anglo-American capitalism. The
divide between friend and potential foe is not always so clear. A
similar remark by Russian President Medvedev about the end of American
economic supremacy seems odd from a leader whose nation is on the verge
of its own economic collapse. Perhaps he's still inebriated by Russia's
crushing defeat of the Georgian paper-tiger, but the status quo is
presenting a terrible hangover.
Russian oligarchs woke up very early to the effects of the
Russia-Georgia conflict as Russian markets experienced the largest
capital flight since the collapse of the ruble in 1998. As US markets
began to tumble in mid-September, Russian markets have been
experiencing staggering losses as evidenced by several market closures.
Mr. Medvedev has had to rely on Russia's significant financial
reserves, bolstered by the energy windfall of recent years. How
Russians perceive the strength of their market and its actual strength
are quite disproportionate. Russians are already experiencing a rude
awakening after years of rapid growth. On a different note, the crisis
may provide UK Prime Minister Gordon Brown with an opportunity to
resurrect his deteriorating political fortunes as a pair of safe hands.
He earned wide admiration for his tenure as Chancellor of the Exchequer
and has been at the forefront for international reform of the banking
industry.
The uncertainty created by the crisis has led to the erratically
fluctuating price of oil, leaving many petro-states exposed. Despite
the massive earnings of recent years, many of these economies have not
implemented the necessary structural reforms to successfully withstand
long-term market turbulence. Venezuelan President Chavez's
anti-American rhetoric and pursuit of closer ties to Russia and China
are no substitute for hard US currency which fuels his Bolivarian
revolutionary experiment and reliably close American refineries which
efficiently absorb heavy crude Venezuelan oil. What a distant China and
Russia can commercially provide to Venezuela pales in comparison to the
US.
The once exotic emerging markets are being battered. With its enormous
cash reserves, China is struggling to limit the direct impact of the
financial turbulence. However, its export-driven economy will not
escape a lingering crisis as the US and Europe are primary consumers of
their products. In addition, the current US market may provide enormous
opportunities for the cash-filled sovereign wealth funds of the Persian
Gulf States, particularly in the real estate sector and acquisition of
renowned American brand names. However, with their currencies tied to
the US dollar and energy prices falling, they remain vulnerable. Any
attempt to de-link their currencies from the dollar could have serious
political and diplomatic repercussions.
Even the sound and fiscally responsible policies of states, such as
Brazil, are not immune from global turmoil. The enormous economic
growth of recent years risks rapid dissolution. However, Brazil's
energy self-sufficiency and vast agricultural wealth may cushion the
impact. The same cannot be said for much of Latin America, which
remains far more vulnerable, as does Africa. The slight ray of hope of
the past decade which seemed to shine on Africa is dwindling. Many
inhabitants are no longer engaged in the daily struggle for economic
opportunity but in search of a basic meal.
The new world order that emerges from the chaos is still evolving. It
remains the subject of interesting table debate and discussion for
those not directly impacted. However, the realities that emerge in
practice may prove far graver than conceived in theory.
Source:Ocnus.net 2008
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