miércoles, 21 de enero de 2009

A long rider through the desert, at sunset

The Far West is no longer for adventure or promises of miracles and triumphs. The sharp fall in stock markets yesterday, shows that we have only seen the tip of the iceberg of the crisis. The collapse of the Dow Jones, the Ibex, the CAC, the FTSE, and others, remains fully the pattern of this crisis, announced in The fall of a plane in flames. And although some still wonder where is the crisis if they are not large cities in banks, as shows the scene of the film It's A Wonderful Life, by Frank Capra, with an example of bank runs in the 30s , forgetting that the transactions are done online today anywhere in the world, 24 hours a day, every minute, or those expressing horror at the apocalyptic interventionism that was to come as the only alternative to avoid total collapse.

The truth is that the world is in chaos and made the man who left the White House yesterday is one of the main culprits. In this connection the movie by WSJ The fall of Wall Street by those who did, with testimony from the first source. United States takes eight years and lost to the new occupant of the White House might touch him at least three of the four years of his government to amend the course. It's the lost decade. This is because the U.S. is in ruins in the center of the largest debt in its history, as noted in The troubling U.S. deficit, a deficit caused by an ideological preference for creating debt to manage macroeconomic management and silence the cycle.

To understand the magnitude of the problem and why there are so few options for those responsible for economic policy, should be given a look at this graphic that shows the growth of the real economy and the growth of the financial sector since 1952. In those years, the level of debt both in the public and private sector was approximately 60% of GDP. For three decades remained flush controlled. But since 1981, as shown in the chart, the deficit soared. Within a few years, the debt increases by 20 times and the debt / GDP ratio becomes 360%. Moreover, much of this debt is in the private sector, as seen in the other graph. The public debt is around 52% of GDP, but private debt increases 22 times, three times faster than the overall economy as a whole.

Why the government will make Obama an important turning point on how to look at the world. It will be a return to the real world. That machine was the U.S. consumer had to burst one day, and they have. It is time for the skinny cows, since 6% of world population, devoured nearly 50% of global production. Does that mean the magnitude of the crisis? Enough that oil consumption dropped 10% in the U.S. for the price back to levels of four years ago. Imagine what it comes with a general decline in consumption from 15% to the world.

All the crises of the last 70 years occurred far from the U.S.. And in each, the U.S. was the buyer of last resort, thus avoiding a deepening crisis. Now that this country is the epicenter of the crisis, the world falls into the quagmire created by the ideology of inequality. No buyer of last resort. Nor will it for a long time for three decades because economists never thought about the likelihood of an event like this. And those who believed it, as Keynes and Minsky were treated as bastards, were treated as heretics by system.

This has reduced the range of maneuver for the governments economic policy. U.S. and UK experienced devaluations. EU countries may not be reluctant to abandon the euro and allowing widespread bankruptcies but politically unacceptable. Finally, encourage the use of inflation will be allowed to dilute the debt and spread across all consumers. The patient left the ICU, you must run with oxygen hoses and ponds behind him to revive an economy that has been completely collapsed.

Images Graphic 1, Graphic 2

Note: This article was published originally in El Blog Salmón, in Spanish. See the original article: La larga cabalgata por el desierto, al atardecer
Nota: Este artículo fue publicado originalmente en El Blog Salmón. Vea el artículo original: La larga cabalgata por el desierto, al atardecer
Imagen | striatic
Link: Economist's View


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