Rambling about the financial crisis (Part 2)

We forewarned you in Part One of these ramblings. And as predicted, the financial crisis is turning into a runaway mare which has few mannerisms that auger well for the world. How long will it be out of the corral and with what consequences? Some scholars speculate that we are heading inevitably into global recession, and that it is already beginning to be felt in the U.S. and those countries directly involved in its policies such as England, Spain, France, Italy, Germany and Japan. (In fact, their bankruptcy and production cuts have led to an escalation of layoffs totaling 1,200,000 this year and 240,000 in October alone). Others say that by 2009, there will be all kinds of stampedes that will only calm after a five year minimum respite, and long after said mustangs have left their would-be jockeys in the dust. In fact, the crisis’ factors are manifold and the cast of actors so disparate that predicting even the most immediate of future scenarios with any degree of certainty is difficult for a plethora of reasons.

Here, again, the Japanese thinking goes a long way with its global game of causes and effects. The world moves due to "life forces" present in every component of Nature with a spontaneous, yet permanent interaction, generating unexpected events and facts aimed which test mankind ... these forces are also the cause of life’s every imbalance. Thus, when imbalances occur, the Japanese lose no time for blame but spend it all on organizing how to meet said challenge with their typical refrain: Destiny! Hence, when Emperor Hirohito declared war in 1941, he did not enter into recriminations but only justified the war based on the fact that it was "a need that could not be addressed otherwise." Based on these criteria, we should recognize that when we talk about this crisis having its origins in the US housing bubble, we are only telling half the story. Isn’t it reasonable to think that behind this dire scenario there should be a huge group of dark forces at work, whose minions could not maintain the precarious balance in which they worked, thus having no other option but to uncover the tip of the iceberg? Well, this is the very vision of catastrophic events that lead us to chaos while the world sought to overcome its main excesses "by pulling chestnuts from the fire with the cat's paw" as has happened throughout history. But - and there's always a but – the world today has not been the same for the past thirty years. And the distribution of extreme forces tends to balance out given the infinite possibility of coalition options. The many emerging powers, which have accumulated resources at high speeds and ever-increasing degrees of inertia, have been placing their pieces on the global chessboard, awaiting the right time to move. That time is, perhaps, now.

Hence, the global uproar from the various power, or as some prefer, cooperation blocs during their negotiation or strategy meetings. In the lead role we have the G20, which seems to have resolved to meet (and continue to meet indefinitely) due to its feeling that the floor has become so very slippery. The G20 was launched in Berlin in 1999 by forming a community of developed countries with emerging countries; all selected based on the gravity which they exerted in the global economy. As for their aims, they are the same as the G7 organized in the mid-'70s (thereafter G8), which focus on centering and managing the entire global economic potential within the West. All its members were Western giants whose every step resonated throughout the world, with the only exception being Japan, which was seen as a staunch supporter of US strategic and wildcard to be played in Asia. Then they added Russia, a Russia supposedly free of any Soviet or Cold War taint. (Then came, Canada, U.S., France, Italy, Japan, Russia and the United Kingdom ...). With the end of the twentieth century, common sense would have seem to dictate the addition of key emerging nations such as Saudi Arabia, Argentina, Australia, Brazil, China, South Korea, India, Indonesia, Mexico, Turkey, South Africa and the European Union, which was viewed as a block. This new bloc would be an unstoppable force representing nearly 90% of world GDP, 80% of international trade and two-thirds of the planet’s population. The G20 makeup is presented as "informal" but moving in a scenario of careful respectability, wisdom and as being representative of the majority will of the planet because its opinion-makers are finance ministers and central bank presidents of the respective countries. Even more, it is not uncommon to see in their meetings the president of the International Monetary Fund (IMF) and World Bank president, as occurred on Nov. 8 and 9 at its annual meeting held in Sao Paulo. Given this background, we can only infer the almost omnipotent weight that this G20 would show in the management of global monetary policies, much more when the threads are moved from the inside with conclusions made not by democratic voting, but based on economic criteria.

Until 2007, everything worked according to plan. But the crisis with its concomitant losses of respect and confidence towards those who have caused it, gave the emerging powers an opportunity to show what cards they are capable of playing. We hear their voices and see sharp edges. For example, in Sao Paulo the group BRIC (Brazil, Russia, India and China) appears to be promoting their own solutions to the global crisis (including drastic measures to curb unilateral management of financial guidelines). This would impinge upon the IMF and World Bank’s purview. This proposal is not only welcome to the ears of emerging powers; even France’s Finance Minister considers that such institutions have been carried away by imperialist temptations. This is in addition to expanding the Group charter to make it more equitable in terms of continental interests as well as including the possibility of promoting trade exchange with non-dollar currencies and a return to barter if there is agreement between the parties. (Hasn’t Venezuela been harshly criticized for promoting an idea to this?)

The US has rushed to request a special session for Saturday, Nov. 15 in Washington to deepen its understanding of and reach consensus on the vital issues raised in Sao Paulo. To this end, lobby work preparatory to this "summit" ('nemahuashi' in Japanese) has become feverish, seeking to secure majorities on each issue, giving Spain the right to formally attend (though not a member) with the use of a quota assigned by France, convincing that adjustments could be made to harshly criticized international organizations, not to encroach upon their current powers, etc... Furthermore, securing the assistance of a Chinese trillionaire, following the example of Japan which will provide a loan of $104 billion to the IDB. However, this strategy could be unsuccessful because China has released no signs of willingness to pay for the sins of others. Anyway, the hosts have already reported on the "unanimity" of criteria, the low desirability of expanding the group and the early submission of proposals to curb the effects of the global crisis(?). (At the time of writing, this meeting is taking place).

But alongside the G20, APEC is also gaining ground. And Chile has a place in APEC. It was also created and led by the US in 1989 given the growing interdependence of Pacific trade. APEC seeks to establish free trade and practical cooperation within the region. Reportedly, it represents more than 2.5 billion people (41%), a GDP of about $20 trillion (56%) and 49% of international trade. It is composed of Australia, Brunei, Canada, Chile, China, Indonesia, Japan, Korea, Malaysia, Mexico, New Zealand, Papua, Peru, Russia, Singapore, Taipei, Thailand, USA and Vietnam. (With only this limited background provided and observing two groups, it becomes very difficult to think naively that both blocs are geared towards reaching the goals via the same route). Rather, there is dense network of wires that weave in all directions while part of its components appear in both blocs - China, Japan, USA, Indonesia, Korea, etc.. - and their proclaimed rates of overlapping influence indicators that can only reference values. Their XVI meeting occurs Nov. 22-23 in Lima. Here, some significant cracks may become noticeable as China makes a bid to become Latin America’s primary trading partner. As such, China is facilitating FTAs with Latin American nations and regional integration organizations such as MERCOSUR and the Andean Pacific. (It is currently negotiating with Central America).

But this plethora of players and intentions are even more complicated when we mix in ASEAN+3 and G10+3 with a distinctly Asian composition (Association of Southeast Asian Nations), comprising Indonesia, Malaysia, the Philippines, Singapore, Thailand, Brunei, Vietnam, Laos, Burma and Cambodia ... plus China, Korea and Japan. This first organization was launched in August 1967 with the aim of accelerating economic growth and promoting peace and regional stability. Its first contacts were with the European Union (EU) and resulted in no significant achievements; a situation that is changing at present by the tremendous weight it has achieved in the political and commercial realms. At the moment, it is currently negotiating a bilateral investment pact with China to be signed at the summit in Bangkok in December. At the same time, Japan has signed an FTA with the Philippines while playing an important diplomatic role in overcoming or postponing disagreements between members. The ASEAN +3 shows that it is a great advantage to share common cultural roots. These shared traits represent an enormous cohesive force if it allows itself to be driven by strong and charismatic leadership. If so, their presence within the global picture could become unstoppable. And, apparently, things are heading in that direction.

Up until now, we have a ultra-condensed overview of the current global dynamic, because we have not included the entire tidal wave of pressures and partnerships that currently involve and, will involve, India, Russia, Korea, Australia, Arab countries, OPEC, EU, the Jewish community, etc... But at least with this limited background we can see that there is no possibility of simple answers because we are immersed in a vast and labyrinthine web with more than one spider at work. So when we try to approach a truth only by following the course of a line, we inevitably fall into distortions of reality by failing to consider the many "life forces" which have dynamics that attract, repel and change everything that relates to them.

And about Japan, what can we say? Due to its location within the global arena, we believe it is playing a tremendously complex role in which it also plays itself. Since the end of the Second World War, this particular 'giri' (commitment), contracted with the US has somehow continued in force. Despite leaving behind its status as a debtor, defeated, technologically-deficient nation long ago, Japan has continued to back the US in an almost unconditional way. Tied to treaties and conventions, Japan has long served as a guarantor that sustains the US economically and as a contributor to its permanent expansionist policies and overall world control. One of its recent failures in policy has been let its name be stained by the Iraq war; even if it is now, almost stealthily, beginning a distancing process, freely deliberating before the entire world. Recent examples of these efforts are: a) the launch of the first telecommunications satellite designed and manufactured in Japan that will deliver TV signals and provide other services to the Asia Pacific without having to use the American platforms, b) rejection by the party opponent (LDP) of the Bill which sought to renew Japanese support to coalition troops operating in Iraq, c) exit from Iraq of Japanese troops, d) expression of its concern to move closer to Asia and Latin America, e) its establishment of an science and technology elite that operates in the fields of creativity and research, three recent Nobel prizes in chemistry and physics confirm this effort’s progress, f) increasing its competitiveness in high technology products such as the advanced digital ISDB-T system that competes with those offered by the US and Europe, g)showing itself to be closer to the interior of the G10 +3, with a determination to implement the Fukuda Doctrine for the effective consolidation of the Group, h) its misgivings about giving itself the right to bear nuclear arms.

But their actions could be highly significant in international politics, if they act as a mediator of nearby conflicts. Admittedly, it is more urgent to look within itself to confront the domestic recession which is has started to acknowledge. But beyond that, considering the times of current imbalances which it must confront using the cards it has been dealt and facing a world that it continues to shrink and that could well become the "inland sea" espoused by the Doctrine Fukuda; it could be a Trojan Horse located in the East as well as in the West in order to interconnect influences from both sides with an aim to unifying wills.

Clearly, it is difficult to achieve results without first looking at the frightening performances of game cocks (hopefully, they only act this way at the negotiating table). For the rest, it is essential to fulfill this role as conciliator, much more when the alternative of extreme violence is reasonably dismissed by the apocalyptic vision of zero winners. If so, it would not be unusual in the short or long term, this entire uncertain outlook may well lead to – perhaps - the use of a two-handled skillet. Like Emperor Hirohito, we would have to say that this should be so because it is “a need that could not be addressed otherwise.”