economy on the precipice of disaster
By Jose Ignacio Ramonet
Indo-Asian News Service
Havana, Sep 17 (Prensa Latina) For the first time in modern
days, three major economic crises on financial, energy and
food fronts have merged together, bringing world economy to
the precipice of a disaster.
The truth is that we are facing an economic cataclysm of unprecedented
magnitude, whose social effects are just beginning to be felt
and will explode with unpredictable savagery in the next many
Disaster is never certain and numerology is not exactly a
science, but the year 2009 could very well turn out like the
As feared, the financial crisis continues to worsen.
To the problems suffered by some US banking giants such as
Bear Stearns, Merrill Lynch and the Citigroup add the recent
crisis of Lehman Brothers, the world"s fourth largest
bank, which announced June 9 a loss of 1.7 billion euros ($2.4
Since this is Lehman's first deficit since being listed in
the Exchange in 1994, the loss had the effect of an earthquake
in a financial America that was already violently traumatized.
Every day there are new reports of banks going under. So far,
the most affected entities have admitted losses totaling almost
250 billion euros ($356 billion). And the International Monetary
Fund estimates that, to emerge from the disaster, the system
will need about 610 billion euros ($869 billion).
The crisis began in the United States in August 2007 with
subprime mortgages falling in arrears.
Banking entities no longer lend money. They all mistrust the
financial health of their rivals. Despite the massive injections
of liquidity made by the major central banks, the drought
of money in the market has been unprecedented.
From the financial sphere, the crisis has moved to the entire
economic system. Suddenly, the economies of the developed
countries have cooled. Europe (particularly Spain) is in full
deceleration and the United States is on the brink of a recession.
The harshness of this development is most noticeable in the
real estate sector. During the first quarter of 2008, home
sales in Spain dropped 29 percent. Nearly two million apartments
and homes could not find a buyer. The price of land continues
And the rise in mortgage interests and the fears of recession
plunge the sector into an infernal spiral, with ferocious
effects on all fronts of the huge construction industry. All
the construction businesses are now in the eye of the hurricane
and witness the destruction of tens of thousands of jobs.
From financial crisis we have gone on to a social crisis.
And the authoritarian policies emerge again. The European
Parliament June 18 approved the infamous "directive of
return (of the migrants)" and the Spanish authorities
have announced their willingness to arrange for the eviction
from Spain of one million foreign workers.
On top of this awful situation comes the third shock in the
form of oil, as the price of a barrel of crude rises to about
$140. That's an irrational increase (in 1998, a barrel cost
less than $10), due mainly to the action of speculators.
Investors flee the real estate bubble and shift colossal sums
of money because they are now betting on the price of oil
rising to $200 a barrel. Oil is now financialized, with the
consequences we see: a formidable rise in the prices at the
pumps and explosions of anger on the part of fishermen, truckers,
farmers, taxi drivers and all the professionals who are most
In many countries, by staging demonstrations and confrontations,
those professionals demand help, subsidies or tax breaks from
Next comes the food price spiral.
In about 40 countries, the high cost of food has provoked
uprisings and general revolts. The summit of the United Nations
Food and Agriculture Organization (FAO), held June 5 in Rome
could not reach an agreement to relaunch worldwide food production.
Here, too, speculators fleeing from the financial disaster
are partly responsible, because they are betting on a high
price of future harvests. So even agriculture is being financialized.
This is the balance left by a quarter century of neoliberalism:
three intertwined crises.
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