10-01-2008, 07:37 PM
<b>THE END OF ARROGANCE </b>
<!--QuoteBegin-->QUOTE<!--QuoteEBegin-->Of course, it is not solely the result of undesirable economic developments that the United States is in the process of forfeiting its unique position in the world and that the world is moving toward what Fareed Zakaria, editor of Newsweek International, calls a "post-American age." Washington has also lost much of its political ability to impose its will on other countries. <!--QuoteEnd--><!--QuoteEEnd-->
<!--QuoteBegin-->QUOTE<!--QuoteEBegin-->American economist Raghuram Rajan, whom ECB President Trichet is frequently quoting these days, had a premonition of the current disaster three years ago. The total integration of the markets "exposes the system to large systemic shocks," Rajan wrote then in a study. Although the economy had survived many crises before, like the bursting of the Internet bubble, "this should not lead us to be too optimistic." "Can we be confident that the shocks were large enough and in the right places to fully test the system?" Rajan asked. "A shock to equity markets, though large," he continued, "may have less effect than a shock to credit markets."
There was certainly no shortage of warnings, and there were many voices of caution. As long ago as 1936, John Maynard Keynes recognized the risk that "speculation may win the upper hand" in the markets. Its influence in New York, the British economist wrote, was "enormous," and the situation would become serious "when the capital development of a country becomes the by-product of the activities of a casino." <!--QuoteEnd--><!--QuoteEEnd-->
<!--QuoteBegin-->QUOTE<!--QuoteEBegin-->This is all the more vexing for the German government because it was the one that warned against the current malaise some time ago. During the G-8 economic summit in Heiligendamm more than a year ago, for example, Chancellor Angela Merkel tried to convince her state guests of the need for tighter controls on the financial markets. But President Bush and then British Prime Minister Tony Blair gave the chancellor the cold shoulder. <!--QuoteEnd--><!--QuoteEEnd-->
<!--QuoteBegin-->QUOTE<!--QuoteEBegin-->Of course, it is not solely the result of undesirable economic developments that the United States is in the process of forfeiting its unique position in the world and that the world is moving toward what Fareed Zakaria, editor of Newsweek International, calls a "post-American age." Washington has also lost much of its political ability to impose its will on other countries. <!--QuoteEnd--><!--QuoteEEnd-->
<!--QuoteBegin-->QUOTE<!--QuoteEBegin-->American economist Raghuram Rajan, whom ECB President Trichet is frequently quoting these days, had a premonition of the current disaster three years ago. The total integration of the markets "exposes the system to large systemic shocks," Rajan wrote then in a study. Although the economy had survived many crises before, like the bursting of the Internet bubble, "this should not lead us to be too optimistic." "Can we be confident that the shocks were large enough and in the right places to fully test the system?" Rajan asked. "A shock to equity markets, though large," he continued, "may have less effect than a shock to credit markets."
There was certainly no shortage of warnings, and there were many voices of caution. As long ago as 1936, John Maynard Keynes recognized the risk that "speculation may win the upper hand" in the markets. Its influence in New York, the British economist wrote, was "enormous," and the situation would become serious "when the capital development of a country becomes the by-product of the activities of a casino." <!--QuoteEnd--><!--QuoteEEnd-->
<!--QuoteBegin-->QUOTE<!--QuoteEBegin-->This is all the more vexing for the German government because it was the one that warned against the current malaise some time ago. During the G-8 economic summit in Heiligendamm more than a year ago, for example, Chancellor Angela Merkel tried to convince her state guests of the need for tighter controls on the financial markets. But President Bush and then British Prime Minister Tony Blair gave the chancellor the cold shoulder. <!--QuoteEnd--><!--QuoteEEnd-->