Similar crises brought about by the same protagonists within the same framework. Similar except that this time it’s global.

Greed, incompetence, a passive or ignorant electorate or no real electorate, have allowed the princes of capitalism and their cohorts to bring death, starvation and misery, to the world this time.

http://www.imf.org/external/pubs/ft/weo/2009/update/01/index.htm

“• Advanced economies will experience their sharpest contraction in the post-war period, the Update said. The IMF expects real activity to contract by around 1½ percent in the United States, 2 percent in the euro area, and 2½ percent in Japan.

• Though more resilient than in previous global downturns, emerging and developing economies will also suffer serious setbacks. For example, growth is expected to slow to 6¾ percent in China and 5 percent in India.

• Global growth is projected to rebound in 2010 to 3.0 percent after falling sharply to just 0.5 percent in 2009, when measured in terms of purchasing power parity. The 2009 world growth forecast has been revised downward by 1.7 percent compared with the last IMF projection last November.”

It s here sir. Here we are. No problems here, see. Hell we invented this. Ok now Here you go sir, your truckload of our nice sounding words. It s all safely registerred, don t you worry a bit. It s Electronic. Just as seen in the commercial / presented by our new set of carefully handpicked – all Keynesian – trustlooking models. Now, hand over the money. All there, good. Do you want more sir? No? Sure? Ok, then, but …

…you ll be back.
Trust me 

(American International Group Inc., the insurer saved from collapse by government money after losses on credit-default swaps, offered about $450 million in retention pay to employees of the unit that sold the derivatives)

Great Synopsis of current EM problems…

97-98 currency crisis = reserve accumulation result
08-09 economic slowdown =????

What’s next? – As a reader of this blog, I know you wish for them not subsidize the rich countries by “managing” exchange rates…but did you think the reserve accumulation answer when they went into 97-98 crisis? if so, whats their next move? if not – what else?

It` s a race to beat the markets to issue before the above procedure blows some of the fog away.

1. stockmarkets are a common leading indicator. All kinds of things may be wrong with financial markets but for the purposes of my argument (of where to look for a bottom), it may be a good idea to see when some asset markets (as proxy for wealth in a recession that seems to display severe wealth effect problems). It is far from scientific, but, OK that is not the purpose of bloging.
2. Re Japan: what I meant includes political elements of course. And I hope you’re right about the intolerance for not-hardship-defeating leaders in the US and China. But kep in mind the public response to that type of leaders in Germany and Japan in the 1930s…
3. Re US recession fighting measures: I guess that there is ood chance that by helping US consumers, the US gvt will get the unintended consequence of helping Chinese producers…If China helped Chinese consumers, would that help US producers??

I suspect that Geithner’s remarks on currency manipulation were mostly a shot across the bow, removing sustained devaluation from the list of Chinese policy alternatives. If China continues to peg at current rates and if trade deficits keep falling then I don’t think that there will be issues with currency.

On the other hand if there is a sustained drop in the RMB, then at that point we are in a new situation. Personally, I seriously doubt that China is going to drop the RMB, because I can’t see any way that China benefits from that. If you do see a major devaluation in the RMB, then you will see the US react by increasing tariffs.

I think that we may be back to 1998, when everyone *wanted* the PRC to peg to the dollar.