lunes, 24 de noviembre de 2008

THE GLOBAL FINANCIAL CRISIS: THE DEATH OF CAPITALISM (III)

Summarizing, until now we know that:

1.- The "ninja" mortgages were producing that the banks around the world were full of garbage and untrust, and every one of use was paying more money every month in the mortgage bill.

But the next question is: How has affected that to the real economy?...In Finland is not still very strong, but for instance, in the U.S.A. 200.000 employments have been destroyed in a month; Spain is destroying employmen at a rate of near 7.000 people/day....the companies in the countries affected have started to have real problems of liquidity, because the work capital has disappeared. How has affected the financial crisis to the companies?....

THE FEAR IN THE BANKS: STOP CREDITS BEFORE WE HAVE NO MORE MONEY!!

One aspect of this "transmission" of the financial crisis to real economy is that, when the "ninja" business started to fail, the banks stopped the credit to the normal companies. Why?..because they were not sure about three things:

a) how many money they were having available (that is, how many money have they lost in the investments on "hedge funds" and similar "financial instruments").
b) how could they know what is a good or a bad credit, after the big failure they had had!!!
c) how many money they could ask for to another banks, in case of emergency, because the other banks were in the same or worst situation!!

So, through the restriction of credits of the banks, the money has stopped to flow.

The Untrust, provoked by the lack of consciousness, has created a stagnation of the money flow all around the world.

Now, in other hand, we have to consider that, in parallel, all these years, it was happening something truly important, that I can call:

The incredible rise up of the Emergent Countries!!!: The new star of China!!

Lets try to describe this rise up of the emergent countries plainly again:

  • Every house that every one of us was buying during these years was paid with mortgage money. This money was paid to the constructors.
  • Additionally, in many cases, we were receiving more money than the market value of the house (sometimes 150% of the market value of the estate), so we were spending this money in new cars (do you understand why GM, Ford, etc...are having problems now that the banks are not giving more mortages?....), new technological gadgets, increasing our consumption, going holidays, going to dinner, etc....
  • The constructor, with the money he was receiving, was paying mainly wages, his suppliers, and finally he was retaining some profit for himself. To do what?...probably, to buy a new car, a new house, or to go holidays with his family...and so on...
  • The suppliers, with the money they were receiving, were paying wages again, and retaining some profit for themselves. To do what?...now you know what for...
  • The workers that were receiving their wages, were paying their mortgages, and spending the rest in...do you wonder what?....yes, you know it....cars, holidays, dinners, etc...why?..because they have "extra money from their mortage" or the bank could lend them more money!!..they would pay in the future!...things were going really well!!!
  • Therefore, the main amount of money of the mortgages was going to pay "wages" and "companie profits". Both were destined mainly to increase in an spectacular way the "consumption" of all kinds of goods and services.
Now, the next question is: where are this goods and services coming from (our DVD,s, our clothes, our computers, our plastics, our light bulbs, etc...)?...where are they produced?...

Yes!!! In the emergent countries!!!!..like China, India, Taiwan, and Korea.

20 years ago, the money invested in China, for instance, was coming back to the western world. why?...becaue there was little amounts of money circulating in China itself. Most of the people was so poor, that the internal consumption in China was almost non existent. So, the Western countries (I will call them the WC from now on...don't ask why.... :-) ) were investing the money to build factories, and then paying miserable wages to the chinese people to produce our "goods", so that they could later sell these goods in the WC's at a much higher price, creating for themselves an excellent profit.

Summarizing: The WC's companies were using the people of the emergent countries as almost slaves, to create high profits back in the WC's. Additionally, the consumers in the WC's were another kind of slaves, consuming more and more and more withour having (or without wanting to have....) the faintest idea about what was happening. The first people (the chinese workers)were unhappy slaves, and the second one (the people in the WC's) happy and addicted slaves.

But, after decades, the chinese people and their government had decided that they want to be happy too!!..obvious, isn't it?...so, the wealth created in decades, has started to be distributed in China, and the people has started to consume. Not so much as in the WC's, but remember that the population of China is 1.500 million people. Do you remember these old say: "If the all the chinese were stepping at the same time, the world would tremble!!" ??...ok, now it has started to happen. They have started to walk together.

So, the money invested in China is not coming back (at least not as before). And wonder something...who has bought the debt that has been issued by the U.S.A. governments in order to have money to save their banks?....YES!!!China!!! interesting, isn't?....

Here you have some info about China on "The Economist": http://www.economist.com/countries/China/profile.cfm?folder=Profile%2DEconomic%20Data&CFID=32839557&CFTOKEN=25446794

Here you have a couple of videos on the topic of Chinese development:








We could say that, in the last years, the happy slaves in the WC's were living happy and dreamy lives thanks to the poor and unhappy slaves of the Emergent Countries (that I will call EC's, from now on ), but now this is not possible any longer, so that we have to share the pie with the unhappy slaves of the EC's that have become more happy now that they have a piece of pie.

This is other of the aspects of globalization that noone had talked about before.

The question now is: Are we going to fight for the pie, or are we going to create, to develop, a true global economic model, that is including all countries, and not any longer sustained by poverty-based productivity, but sustained in creativity and innovation because of common vision?

This last possibility is threatened by two opposed tendencies:

  • The first one is that EC's companies and Asiatic Countries (AC's) Companies begin to buy WC's companies, imposing their values and lifestyle. In the EC's and AC's a minority lives in a high standard, and a majority live on extreme poverty. So, they reproduce in domestic scale what the WC's were doing in global scale. Try to imagine the consequences of imposing this lyfestyle on Europe and U.S.A.
  • The second option is that (as the G-20 said in Washington) a new central organism (probably a Central World Bank) is created, to control finances and money in a global level. Connected with that, in a few years it will be created a single world currency. This would mean that economics would be something unreachable for democratic governments, that would impose its rules on all countries and all peoples. This would mean a completely un-human economics. Try to imagine, working 80 hours per week, just because the Central World Bank has said that thw WC's productivity is so low that we can not compete with the AC's, and this kind of decisions, now don't depend on your government. How do you feel imagining it?



Do you still think that we can do nothing about economics?....Do you still think that we can just be sitted in our sofas seeing TV?...