There is a grim element of farce to the way the political leaders of the world’s richest countries are struggling to cope with the international financial crisis.
Most farcical is undoubtedly George W. Bush who has spoken no less than 21 times in the past 26 days seeking vainly to calm panicking investors and insert a floor beneath collapsing markets. It could be argued that at a time when confidence is so lacking in the markets, the world leader to whom has fallen the task of telling everyone it is going to be all right, is one of the most discredited and distrusted occupants of the White House in many years.
It is not just that Bush fails to display much in the way of intellect but also that from the moment he entered office and trashed US backing for the Kyoto climate deal, his record has been a consistent series of bad judgments.
So when Bush announced loftily yesterday morning after a half-hour White House meeting with G-7 finance ministers, “We’ve all agreed that the actions we take should protect our taxpayers and we’ve agreed that we ought to work with other nations”, it is likely to have inspired greater investor despair. Consider this vacuous sentence in detail. The agreement of which he spoke has nothing to do with any particular course of action.
It was simply a consensus on taxpayer protection and the essential need for countries to avoid acting unilaterally. The G-7 finance ministers did not need to jump on aeroplanes and fly to Washington to come up with such a banal and basic statement.
The fact is after $700 billion has been thrown at struggling US banks and the British have agreed to recapitalize and so part-nationalize their major banks and central banks around the world have been pouring hundreds of billions of dollars of liquidity into the market, the essential interbank wholesale money markets are still not working and stock markets spent last week in steep dives.
The reality is that politicians haven’t a clue as to what to do. This is epitomized in the mantra used by many that they will “do whatever is necessary” to stem the rot. That word “whatever” is the clincher. It confesses there is in reality no clear idea of what, if anything, can be done.
Instead, as the next problem appears, they will figure out a response, which will almost certainly be to throw yet more taxpayers’ money at it. And therein lies the danger. Currently it is the banking system that is going bust.
Soon as credit dries up, it will be companies. Then as investors wake up to the fact that trillions of dollars are being printed to fund these bailouts, it will be whole countries that will be tottering on the brink of economic collapse.
This harsh truth has at least already bred one good joke. Question: “What is the capital of Iceland?” Answer: “About $4.50c”.
