Lehman is a footnote in the great East-West globalisation crisis

[jakeXT]

Lehman is a footnote in the great East-West globalisation crisis

You can see why markets and governments both like to blame Lehman Brothers for the "Great Contraction". Such wishful thinking shields investors from the nasty reality that deeper forces are at work: it absolves officialdom from its own destructive role in fixing the price of credit too low for 20 years, luring us into debt.


By Ambrose Evans-Pritchard
Published: 5:58PM BST 12 Sep 2009

Comments 61 | Comment on this article

As my colleague Jeremy Warner puts it, Lehman no more caused the economic convulsions of the last year than the assassination of an Austrian prince caused the First World War. There was the little matter of a rising Germany then, and a rising China now. Both scrambled the international system, albeit in different ways.

The 48 hours that killed Lehman and AIG – and would have killed Merrill, Morgan Stanley, and Goldman Sachs within a week if Washington had not stepped in – merely brought to a head the inevitable exhaustion of a global order in which the West chokes debt, and the East chokes on export capacity.


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Couldn't they see that this was cheating: stealing from the future? No, they were seduced by "inflation targeting" – watch goods, ignore assets – just as cheap imports from China rendered the doctrine obsolete. It always takes ideology to consummate massive error.

Asia in turn caused a global bond bubble by accumulating $5 trillion in reserves (a side effect of holding down currencies to gain export share). Long-term rates collapsed too. The global credit bubble was complete.

The Great Game can continue only as long as deficit countries – currently, US (-$628bn), Spain
(-$109bn), Italy (-$62bn), France (-$58bn), Britain (-$53bn), Greece (-$42bn), and east Europe – are willing to bankrupt themselves buying Asian goods. Obviously, this is absurd.

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http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/6179033/Lehman-is-a-footnote-in-the-great-East-West-globalisation-crisis.html



Why a rescue of Lehman would not have saved us

By Niall Ferguson

Published: September 15 2009 03:00 | Last updated: September 15 2009 03:00

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If only. If only Lehman had been saved, there would have been no credit crunch. No near-Depression. The S&P 500 would not have sunk to 682 (its nadir last March). We would probably be back to 1500 by now.

If only Lehman had been saved, Republicans might muse, there would have been no Democratic landslide in November's US elections. Instead of President Barack Obama, we would have John McCain in the White House. After all, the presidential race was still pretty close in the summer of last year. It was the severity of the economic crisis after September 15 that really doomed Mr McCain - not least because he himself had earlier confessed his ignorance of economics.

A McCain presidency, of course, would have had very different priorities: no Keynesian stimulus bill, no "public option" in any healthcare reform. If only Lehman had been saved, there would be no threat of Obamacare and no town hall hysteria about socialist "death panels". Why stop there? If only Lehman had been saved and Mr McCain had won, the Green Revolution in Iran would have had American support and Mahmoud Ahmadi-Nejad would no longer be president.

If only Lehman had been saved and the stock market had not tanked, Michael Jackson would not have needed to commit to those 50 comeback gigs in London. He would not have felt so stressed and would not have taken all those sedatives. If only Lehman had been saved, Jacko would still be alive .

If only.

Actually, no. All would not have been for the best in the best of all possible worlds if only Lehman Brothers had been saved. On the contrary, a decision to bail out Mr Fuld would almost certainly have had worse consequences than letting him and his company go under.

http://www.ft.com/cms/s/0/3a1f3d1c-a18f-11de-a88d-00144feabdc0.html