Asia Times: Decouple the world from the dollar

Decouple the world from the dollar
By Korkut A Erturk


Until recently, some economists believed that this economic crisis would end when investors returned to the stock market and recapitalized banks. But investors lacked confidence, thinking that they would be throwing good money after bad. The dubious assets buried deep in balance sheets of US banks still had to be cleansed, but trying to sell them off would further decrease their market value and compound banks' losses. Thus the bottom could not be reached until the investors returned, but investors would stay on the sidelines until asset prices hit bottom.

The initial rescue package from former US Treasury secretary Henry Paulson was aimed at addressing this dilemma by trying to provide a floor to falling asset prices. The Paulson plan failed to change investors' expectations or persuade financial markets that it could provide the bottom that the market would not, and it is doubtful that the latest plan from Treasury Secretary Timothy Geithner and White House economic advisor Larry Summers will do so either.

It is clear that this is no ordinary recession. While there is no consensus on how to revive banks, there appears to be considerable agreement that extreme monetary easing and a massive fiscal stimulus are necessary to prevent the current slump from getting even worse. There is, however, a panacea of sorts for the broken machinery of the global economic system.

While an emphasis on reviving banks and an injection of public spending are both important, the trouble is that neither one directly addresses the main source of global deflation, which is that global imbalances are no longer being recycled effectively. Because US households and banks are now bankrupt, the United States has lost much of its capacity to absorb and recycle foreign trade surpluses. That, in a nutshell, is the driving force behind the global deflationary trend.

Substituting massive public spending for private consumption and putting banks on life support are at best stopgap measures, and it is unlikely that they will bring back the ability to recycle trade surpluses. Even in the best-case scenario, where confidence in the dollar holds up, the broken machinery that produced the world's credit supply cannot not be reassembled because too many borrowers and intermediaries are insolvent. There is no easy way to make the debt overhang go away, and neither tax cuts nor cleansing banks of toxic assets will bring about a lasting increase in private consumption. ............(more)

The complete piece is at: http://www.atimes.com/atimes/Global_Economy/KD16Dj03.html

they supported Japan's attempts to get 'Zombie Banks' alive

and they're supporters of Japan's Temporary Worker laws which allowed employers to hire new workers as Temporary Workers which left them with fewer rights and protections under the national labor laws

You may get it.

Anyone pro-life has GOT to look at how globalization has been abused.