Tuesday, 28 October 2008
Hamlet Without the (Modern) Prince
Robert Peston said this morning,
"£5,000bn has implicitly or explicitly been made available by central banks and governments since April 2008 to support wholesale funding by banks.
That is a genuinely big number. It's equivalent to about a sixth of the total annual economic output of the whole world." & Reuters reports that the Chinese are beginning to cut up rough about the dollar,
"The United States has plundered global wealth by exploiting the dollar's dominance, and the world urgently needs other currencies to take its place, a leading Chinese state newspaper said on Friday.
The front-page commentary in the overseas edition of the People's Daily said that Asian and European countries should banish the U.S. dollar from their direct trade relations for a start, relying only on their own currencies."
I ain't at all sure there is any easy way back from this. Governments aren't getting out of the banking business anytime soon: they're too deeply enmeshed to realistically be able to extract themselves. The Swedish Empire is here to stay. In such circumstances governments are damned if they get the banks to lend and damned if they don't.
How can the dollar - the currency of the world's biggest debtor in a globe collapsing with debt - possibly hold as the international currency of last resort? If the Chinese really do move out of dollars in any kind of big way hyper-inflation in North America - and therefore here - becomes a real possibility. That, surely, is what this call for a 'new Bretton Woods' is all about.
Time for a new political economy (pdf) indeed. But we face a problem here: even the mild reformism of the Compass document I've linked to is seen as wildly Utopian and electorally unpopular.
This crisis, at the moment, is like Hamlet without the Prince; we have no organised alternative to capitalism. Even those isolated voices on the libertarian socialist Left like Chartist who saw this coming, can only offer solutions which, at the moment, sound as if they come from a science fiction novel. The vast majority of ordinary people would find them ridiculous.
Well - they'd find them ridiculous for now. Let's see quite how bad this is going to be....