Not quite.
Although central banks around the world have coordinated policies and cooperated fully, leaders of foreign governments balked at similar bailout plans, and many foreign sovereign investors also remain on the sidelines, The Washington Post reported Thursday.
While policy makers in Europe and Latin American agree that the global financial system is facing its greatest stress and threat since the period up to and after the 1929 stock market crash, they saw little need - - so far - - for major rescue packages in their own countries, The Post reported. Further, sovereign wealth funds, likewise, showed little interest in stepping up to the plate.
The world: well-capitalized spectators
Economist David H. Wang said Britain has cooperated fully, France has proposed a special G-8 summit to deal with the financial crisis, and Russia has acted to stabilize its stock and credit markets, but the rest-of-the-world is "watching the events as they unfold."
Wang said three factors are at work in the rest-of-the-world's cautious stance: national interest, a shift in the geopolitical balance of power, and posturing.
"Regrettably, but predictably, much of the world has turned inward and chosen to focus on its own domestic banks and institutions. There's also the belief, in nations like Brazil and in Middle Eastern economies, that they're more-insulated from the crisis, due to expanded non-U.S. trade relationships and the ability to undertake financial transactions and store value in other currencies, such as the euro," Wang said. "They also see the financial crisis in the context of a transition to a multi-polar financial world, from one dominated by the United States."
A good example of that new financial world in the globalization era is Brazil, Wang said. Historically, a minor economic downturn in the U.S. would cause substantial economic pain for Brazil. Now, flush with $200 billion in reserves and a growing, diversified economy with numerous trade partners, Brazil "is bearing the situation very well," although GDP will slow if global trade declines. "Can you imagine an era in which the U.S. experiences a financial crisis and Brazil is only mildly affected? That's where we are now, in terms of the global economic structure," Wang said. "It's a stunning transformation, really, from where we were a decade ago."
Finally, Wang said a poker game is occurring on the global level. Nations like Brazil, and cash-rich foreign sovereigns are waiting for the right time, and price, to scoop-up U.S. financial companies and other assets. "If they wait another few months, they may get even lower, fire-sale prices of choice assets. When time is on your side, it makes sense to wait," Wang said.
Economic Analysis: Economist Wang added that he doesn't see an end to the dollar's status as the world's reserve currency, but that may be the only 'non-negative' stemming from the financial crisis. Further, after the financial crisis has been checked, Wang said the United States still faces a decade of investment in infrastructure, education, and basic research just to get the nation's economy moving again and to correct structural problems. The question remains, however: where is that money going to come from?
Reader Comments (Page 1 of 1)
9-25-2008 @ 8:31PM
Brazil said...
Some of this Money wil come from Bric !
Brazil China India and Russia!
Can you see it?
http://social.pi.edu I will yalk about it this next week!