WHICH BRINGS US TO THE PRESENT DAY
MELTDOWN - FINANCIAL CRISIS IN THE U.S. CREATES SAME IN EUROPE
(OH NO, ARE WE INTERDEPENDENT?)
WHERE ARE WE NOW?
WHICH BRINGS US TO THE PRESENT DAY:
The U.S. economy in recession and it’s effect on the rest of the world. (and perhaps now, those who say the big, bad overconsumptive USA needs to get back on it’s feet because if the U.S. is not spending it has a direct effect on economies the world over)
They say that when America sneezes, the rest of the world catches a cold.
From the magazine: FOREIGN POLICY April 2008
(Article written by Nouriel Roubini)
The coming financial PANDEMIC
The U.S. financial crisis cannot be contained. Indeed, it has already begun to infect other countries, and it will travel further before it’s done. From sluggish trade to credit crunches, from housing busts to volatile stock markets, this is how the contagion will spread.
Trade will drop.
A weak dollar will make matters worse.
Housing bubbles will burst worldwide.
Commodity prices will fall.
Financial confidence will falter.
For months, economists have debated whether the United States is headed toward a recession. Today, there is no doubt. President George W. Bush can tout his $150 billion economic stimulus package, and the Federal Reserve can continue to cut short term interest rates in an effort to goose consumer spending. But those moves are unlikely to stop the economy’s slide. The severe liquidity and credit crunch from the subprime mortgage bust in now spreading to broader markets, $100 barrels of oil are squeezing consumers, and unemployment continues to climb. And with the housing market melting down, empty pocketed Americans can no longer use their homes as ATMs to fund their shopping sprees. It’s time to face the truth - the U.S. economy is no longer merely battling a touch of the flu; it’s now in the early stages of a painful and persistent bout of pneumonia.
Meanwhile, other countries are watching anxiously, hoping they don’t get sick, too. In recent years, the global economy has been unbalanced, with Americans spending more than they earn and the country running massive external deficits. When the subprime mortgage crisis first hit headlines last year, observers hoped that the rest of the world had enough growth momentum and domestic demand to gird itself from the U.S. slowdown. But making up for slowing U.S. demand will be difficult, if not impossible. American consumers spend about $9 trillion a year. Compare that to Chinese consumers, who spend roughly $1 trillion a year, or Indian consumers, who spend only about $600 billion. Even in wealthy European and Japanese households, low income growth and insecurities about the global economy have caused consumers to save rather than spend.
Meanwhile, countries such as China rely on exports to sustain their high economic growth. So there’s little reason to believe that global buyers will pick up the slack of today’s faltering American consumer, whose spending has already begun to drop.
Because the United States is such a huge part of the global economy - it accounts for about 25 percent of the world’s GDP, and an even larger percentage of international financial transactions - there’s real reason to worry that an American financial virus could mark the beginning of a global economic contagion. It may not devolve into a worldwide recession, but at the very least, other nations should expect sharp economic downturns, too.
Finally, where are we right now?
From the book: “The End of the West?”
(Crisis and change in the Atlantic Order)
The first years of the twenty-first century will long be remembered as a time of political upheaval in Atlantic relations. The United States embarked on a controversial war in Iraq opposed by most Europeans and many of their governments. For the first time in the postwar era, a German chancellor opposed Washington in full public view on a fundamental issue of security and even made opposition to Bush policy a part of his reelection campaign. At the United Nations, France
publicly lobbied Security Council members to oppose a resolution that would authorize the United States’ use of force in Iraq. European hostility to the United States - its polity, power, and policy - reached historic levels. Long standing social and cultural differences between America and Europe in areas such as energy consumption, global warming, the death penalty, transnational justice, and religion were inflamed. In the eyes of many Americans, Europe and the Western alliance were no longer central to the pursuit of U.S. global security. In the eyes of many Europeans, the United States had become a superpower that now must be resisted and contained. Some observers even speculated about “ the end of the West.”
(The text that follows lends itself quite well to being visualized with very dramatic storms turning to calm seas and film clips or photographs of French President Sarkozy, German Chancellor Merkel, replacing Chirac and Shroeder etc.)
The political storms that swirled so violently across the Atlantic over the Iraq War have since calmed, and new leaders have taken office in Western countries seeking to move beyond the conflicts of the recent past. Yet as the conflicts between the United States and Europe over the Iraq War and Bush - era foreign policy recede into the past, questions remain about the longer - term significance and impact of this upheaval on Atlantic relations. The policy agenda of the Western alliance has moved beyond Iraq, but it is less clear that the crisis of the old Atlantic order is really over. The conflicts have receded but the questions have not, at least not the scholarly questions about the logic and character of the Atlantic political order and its future. With the greater distance and perspective that time provides, it is now possible to look more deeply into the structures and foundations of the Western order and into the ways in which the recent conflict exposes the operating logic and trajectory of that order.
The two most important questions in the contemporary debate about conflict and crisis across the Atlantic are how serious is the U.S. -European discord as it was recently experienced and what are its sources? The cover of the February 15 - 21, 2003 issue of the ECONOMIST posed the first question - “How deep is the gulf?” In part this question is about how to describe the nature of the recent Atlantic political conflict. Journalists and public intellectuals have evoked a wide variety of terms to capture what is happening - divorce, rift, estrangement, dividing fates. These terms tend to beg a deeper question about the character of the crisis. Is it a political conflict that has been particularly intense but will come and go - as it has in the past - or are we witnessing a more fundamental break and transformation of U.S. - European relations? That is, is the Atlantic world - or more concretely the Western alliance - breaking apart in some meaningful sense or simply evolving, adjusting, and accomodating itself to new realities?
The second question focuses on the sources of the crisis. Is this recent crisis really about the Bush administration and the war in Iraq or is it driven by deeper fissures that will continue to open up and erode Atlantic relations after the Bush administration and the Iraq War no longer occupy center stage? That is, how “structural” should our analysis be of the troubles that have recently beset U.S. - European relations? To be sure, there are many historic shifts in the international political system that bear on Atlantic relations: the end of the cold war, the rise of U.S. unipolarity, the fits and starts of European unification, the emergence of new security threats, the growing geopolitical importance of Asia, and the globalizing impact of modernity. Does one or several of these transformations auger ill for Atlantic cooperation and community? Would a crisis in U.S. - European relations have erupted if George W. Bush had not been elected or if he had not launched the Iraq War? If there are deep and growing sources of conflict in Atlantic relations, how are they manifested? Some world historical developments may serve to pull America and Europe apart. This is the famous claim of Robert Kagan, who argues that growing power disparities between the United States and Europe breed divergent strategic cultures and interests, which in turn lead to conflicts over rules and institutions, the use of force, and the basic organizing principles of international order. But other world historical developments may be pushing America and Europe back together. The relentless forces of trade and investment and the proliferation of Western transnational civil society are also strengthening the interests and social ties across the Atlantic. Structural shifts can cut both ways.