Europe gets a taste of financial distress

The Europeans watched bemusedly while the storms swept through the U.S. financial markets and the supposedly laissez faire Bush administration pleaded with Congress for a $700 billion government intervention in the marketplace.

The Europeans, Italian Prime Minister Silvio Belusconi among them, blamed the U.S. troubles on our embrace of "speculative capitalism, the implication being that the more tightly regulated European economies were immune from the storm. And if it did hit Europe, Britism Prime Minister Gordon Brown suggested it would be all our fault, the disease would have "come from America."

And then it hit — there and in Asia.

Within a few days, Germany bailed out a large real estate lender, the Benelux countries arranged the takeover of a large banking and insurance company, Great Britain nationalized a large mortgage lender, Iceland bailed out one of its big banks and a large Italian bank was said to be tottering. And the underlying problems were largely home grown. The European markets tanked worse than ours. And, oh yes, the dollar surged against the euro.

Misery may love company but we really need the European markets to stabilize. It does us no good if as a result of financial panic they halt investment in the United States.

The problem is that the Europeans are perhaps less well equipped than the United States to right the situation. While there are 15 nations in the euro zone, the common currency hasn’t translated into uniform financial regulation and European financial firms still operate under a patchwork of rules. There is a European Central Bank but it isn’t as powerful as our Federal Reserve and each country retains its own central bank.

The disunity was apparent over the weekend when Germany announced that it would guarantee all private savings accounts no matter how large and Ireland announced that it would guarantee the deposits and liabilities of its sixth largest banks. Other nations cried foul as deposits out of their banks and into presumably safer German and Irish accounts.

The Europeans may find our way of doing business a little too raw and undisciplined but they may come to envy the size and speed of the response by the Treasury and Congress.


  1. Flapsaddle

    “…and therefore never send to know for whom the bell tolls; it tolls for thee.” – John Donne, Meditations XVII (1623)

    The laws of economics – of the market – are as inexorable and remorseless as those of physics, and we flout them at our great peril.

    Most sincerely,

    T. J. Flapsaddle

  2. griff

    “The Europeans may find our way of doing business a little too raw and undisciplined but they may come to envy the size and speed of the response by the Treasury and Congress.”

    Envious of the speed in which a nation and its people are plundered? Somehow I don’t think so, unless Europe is as dumb as we are.

    And, of course, a Global problem requires a Global solution, yes?

  3. Hoosier_CowBoy

    Denial is dangerous, and whats beings denied by the western economic powers is that the center of economic gravity is shifting in the world. Its shifting to the south and to the east. Its shifting to the center of the worlds’ population where the logistics of resource transport, labor availability and market location make more sense. Places like Dubai, India, China and Indonesia are only experiencing problems to the extent that they are tied up to the western world.

    After decades of westerners consuming and orientals laboring to produce, the eastern world is demanding its due.

    After decades of producing nothing more than asset bubbles, western nations have hollowed themselves out into service economies. Those economic engines merely move paper wealth at a faster and faster pace, without creating or preserving real value.

    Like the people that did not move out of the way of a hurricane after being forewarned, those economies swept away in this storm have no one else to blame but themselves.

  4. almandine

    It is NOT western nations that have hollowed themselves out… but the financial charlatans and media barons that support them. CROOKS – plain and simple. Globalism has no rationale that makes the outsourcing of any production a valued activity – except where the transfer of wealth to lesser economies makes more “consumers” who can increase the profits of the financial elite. God save the wealthy.

    Blame the greedy bastards who would accept their severance packages while enslaving their workers in poverty without even the lost night of sleep they so dearly claim. Blame those who have repackaged bad mortgages into derivatives and other credit default swaps that are nothing more than licenses to steal. Blame the bankers who would print worthless money while telling you it is to save your future. Blame the politicians who are too ignorant and too stupid to even know what has really happened.

    Just don’t blame the nation – a bunch of generally good people who trusted the power elite with their futures – and got the shaft in return. After all, those media types have employed all the psychological and sociological tools at their disposal to keep the masses fat, dumb, and happy.

    The thing is… this is a global problem… because our crooks fooled the rest of them too. Hang on, it’s only gonna get worse.