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`Our world is one. If you didn’t know it before, you should know it now.
The US economy is tanking in ways that will affect each of us. If your parents invested money to help you pay for your university education, that nest egg has been cut in value by 30 percent or more.
Those of us at the other end of a life’s plan have lost a similar percentage of our retirement funds. Loans are hard to get and jobs are uncertain. The U.S. economy is tanking and it is taking the rest of the West with it.
More accurately, the cracks revealed in our economy have shed light on cracks in economies all over Europe. For several weeks, headlines in the G7 nations’ newspapers have been screaming about bank failures and bailouts.
Asian stock markets are responding oh-so-sensitively to the moves made by legislators and investors in countries far from their borders. From my perch in Portugal, I have been scrutinizing these developments and the way the developments are characterized in countries other than my own.
I have noticed that the headlines talk less now about the fact of this bank failure or that bailout or somemarket decline. Now those same headlines are focused on fear. Any economy and altogether in today’s world – can easily fall prey to fear. Economics is, after all, the science of scarcity. My recognition that I may lose what I have, that I may not have what I need, feels threatening. Threat prompts doubt. Doubt by itself is not the problem. It is when everybody starts to doubt at once that doubt is transfigured into fear.
In the usual course of economic events, one investor thinks, “my money isn’t safe,” and liquidates his investment. It doesn’t even show up on the bank’s or the market’s monitor, because someone else, feeling optimistic that day, invests.
Some days there is more optimism, other days more doubt. But we tell ourselves that our economy is resilient and we avoid economic panic for another day. Now, however, fear is staring us and our bankers right in the face.
The bankers are so spooked, they won’t lend each other money. That’s probably because they know how they have stretched the limits of sense and sensibility. Their fear born of doubt is rooted in a little healthy and well-earned guilt.
Consider the way our economic life has unraveled over the past several weeks. A pull, a random string, is cut loose from the weave. As it separates, it releases other threads that have nothing to hold them together except each other.
And what is clear from my European vantage point is that this economic world we have woven has no borders, no carefully bound seams that stop the unraveling. American investment bankers have been exporting capitalist enthusiasm along with speculative and spurious financial products with the apparent promise of wealth without end. Markets around the world bought the premises and the products.
Many blame the U.S. Most are in a state of confusion and self-examination. In Iceland, a commentator talks about a “nightmare of globalization,” because tourists can’t get money from ATM’s and students living abroad can not get money from Iceland to pay rent.
In Germany, some think this really is the last stage in the rise and fall of capitalism as stockbrokers played out their own gambling habits with other people’s money. The very proper British recognize their own mistake in following heedless Americans into a “delirium of deregulation” and lives of luxury fueled by paper profit.
In Ireland, people who could not explain their recent and quite unexpected prosperity seem more bemused than upset as their economy reverts to the way it’s always been.
As with most developments in the paths of people and nations, there is a silver lining. Russia’s Vladimir Putin has been a pain in the world’s neck recently, but he doesn’t have the money to go on being a pain right now because his stock market tanked too as oil prices headed down, Speaking of oil, the OPEC nations are in a panic because demand for oil has plummeted as people around the world lose buying power.
Gas prices are down and that just might stimulate our economy, but it will hurt some other countries that depend on oil revenue to balance national budgets.
The world is one – economically, because we are one in the web of trust that secures us economically, as well as socially and politically.
My well-being depends on yours, and on the well-being of my neighbors here in Portugal, and on the well-being of oil producers in Arab countries and everywhere else in this global market economy with few remaining seams.
Right now there is no trust. Trust has been replaced by fear, in large part because we have collectively forgotten that the pursuit of profit, though important, is not an end in itself.
Markets will return to modest prosperity when the humans who move them remember that how we pursue profit matters.