CRISIS PUTS US AFLOAT IN THE SAME LIFEBOAT

COMMENTS ON
Editorial NY Times (October 20, 2008)
COLLATERAL DAMAGE

Today the NY Times takes up the impact of the financial crisis on the developing world. While the richest nations spend trillions to rescue their banks caused by years of deregulation, greed and excess (my words) they must also be prepared to help the poorer countries which did not cause the problem but are never the less its victims.

The developing nations in the third world are beginning to look like the innocent victim caught up in the global credit squeeze as battered world banks cut their credit lines to poor nations to shore up finances in their own back yard. The Times estimates that capital flows to emerging markets in these countries are expected to plummet by 30% this year.

The picture is bleak...exports from poorer nations are suffering because of weak markets in the developed world. For example we are importing less from Mexico as a result of our weaker economy here. At the same time, remittances from migrant workers who send a good portion of what they earn home--and are an important source of revenue in many third world countries-- are dropping fast. (Elsewhere, the Times reported recently that these same migrant workers who we were so worried about a few short months ago are now leaving the USA for their native homelands because they can not find work here. As these economic migrants return to their native lands they will place new stresses upon those already strained economies.)

The Times makes note of Eastern and Central Europe where banking is largely controlled by Western banks. They point out that Hungary needed 5 billion Euros, while Ukraine asked for 14 billion dollars from the IMF (International Monetary Fund) to prop up its financial system. In our hemisphere the Mexican peso dropped dramatically in reference to the dollar since August 08. (The exchange is currently @13 pesos per dollar vs this past August when it was about 10 pesos per dollar. ) While the Brazilian real and the Korean won have fallen as well. Pakistan, an important ally in the so-called 'war on terror' is said to need $4 billion to plug a whopping trade deficit hole. The times editorial belabors the "myopia" of the world's richest countries (rjk says: particularly the Bush-led USA which has looked particularly 'clueless' in these last weeks, as it follows, first the lead of Brown's Britain to support the worlds banks and then France's Sarkozy to field an International financial conference) as we scurry from pillar to post attempting ad hoc solutions which worsened the 'collective mess' (as the Times puts it so well). Less than two weeks ago, they state: "Washington and Brussels ("stupidly" rjkspeak) allowed Iceland's banks to go bust.

The Times concludes that the great financial powers, as they struggle to contain the disaster should not loose site of other poorer countries. Because in today's interconnected world we are all in the same life-boat and will float or founder together (in my words).