Basically that's what we're doing on the current economic crisis: looking at the finger.
But the real magic trick is being doing while we watch that finger. Without being aware of it, we are witnessing a "social globalization" covert and the crisis is only a means, a tool to make it discreetly and efficiently, without being noticed much that a magic trick is coming on.
Has anyone wondered what happened thanks to the Trade and Financial "Globalization"? It is very simple. What has happened is that now, a German engineer who earns € 4,000 a month and work 40 hours per week, is competing with a Chinese engineer who charges € 400 and works 80 hours per week. And they produce the same goods in a global market!!
When that happened locally there was no problem because they were relatively isolated economic systems where goods and capital flow barriers limited the flow rate. But now, everything the chinese engineer makes is immediately sold in Germany, and Spain and the U.S. ...
This has created a problem. Now companies can relocate and move to emerging countries without problems, where production costs plummet, while its selling prices in the Western world (global market) remain high and thus their profit margins have shot.
But this has another consequence. The business which are moving their locations and production facilities are businesses that do not have (in theory) link with the governments of the countries they leave, thus leaving the unemployment problem behind, on the roof of the governments that short ago gave them grants and facilities for implementation. What happens in these countries, usually advanced, with high labor costs, social structures, high taxes, etc ...? These countries just have two alternatives:
- Innovate and produce advanced goods to compete in quality and performance in emerging markets, thus maintaining their leadership (eg Germany).
- Or lower their quality of life due to the decline in employment and hence private spending, government revenue from taxes, etc ... (Eg Spain, Greece, Italy and Portugal)
But it hurts ... It is not easy to adapt to this new context.
When we are accustomed to a certain standard of living, go unless it is very difficult and people will not understand, so what you have to do is to look for an excuse. Moreover, if there is no excuse, it must be created ... Does anyone have clear what is the best excuse to cut the whole social system of a group of stupid countries?
It is easy: I open the tap of credit for a limited time. I push the private sector (households and companies) to become indebted up to the ears, especially in assets that later may detract (houses). And when I have them good indebted ... I close the tap.
Voila. It's that simple. I'll have to simulate that a total chaos is happening, even dropping some big (Lehman, Bearn, etc ...). But I do not want to ruin families and businesses. What I want is to lower its level of welfare for equating it with the Chinese and Hindus. Therefore I have to aim higher. I have to break the system that supports the structure of social welfare (especially in Europe), that is, I have to act at the macro scale and crumble countries and supranational organizations (eg EU). But it wont be easy, especially by large risky investments inverted in creating those markets.
To achieve this we must find a way to transfer private and business debt to public debt . And how do I do that? Easy, with FEAR. The panic excuse to further chaos if we do not save the financial system is perfect.
Therefore, rating agencies will use all the economic and political pressure (IMF, World Bank, etc ...) to force governments to put their hands in public money, transforming the private debt that families and businesses have with the financial system in sovereign debt. Instead of providing liquidity in the base of the system (making it easier for families and businesses ways to pay their debt to the financial system), they bring it in the top, directly into banks, which created a financial short-cut with public money, thus paralyzing the economy until social and productive systems are globalized.
But, where that public money will come from? it must come from somewhere, right? Of course, here is the end of the game. If I LIMIT THE PUBLIC DEBT, then it will only can come from welfare cuts, copayments, public spending reduction (pensioners, civil servants, infrastructure), labor flexibility, etc, etc, etc ... That is, far from reinforcing the base of the system, they are weakening it, drawing resources from that base to overload the top of the pyramid (government debt to finance the banks). It does not take very streetwise to understand what will happen.
If capital has flowed freely from the advanced world to the emerging one, something has to flow from the emerging to the west ... What is ...?
Social patterns and production models !!!!!
Come on, in not too long we will know our own "Cultural Revolution" in a Mao style.
But a theory must make predictions:
- The attack on the western financial system will be maintained in a systematic way, to continue to drain public resources to it. Europe has been built well and will not be easy to be self-fagocite. It takes time.
- Emerging economies will continue growing to reduce the time of convergence with those who go down (us), in parallel with an unprecedented commercial invasion, not to mention the financial invasion (purchase of public debt). That's what Americans know a while (Read Stiglitz).
And there we are, attending as stupids, looking at the finger (crisis, crisis, crisis) while they are carrying out a "social globalization" process of communicating glasses between the West and the emerging worlds, using economic crisis as a means to eliminate resistances.
Greetings
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