US getting worried and impatient over euro crisis

The Greek parliament is voting this week on the drastic austerity measures that have been ordered by the EU as a condition for the country receiving the rest of its bailout money. As Washington watches the situation unfold with unease, US officials are voicing an increasing amount of frustration that European leaders do not seem to have the situation under control. And the officials know that if the euro collapses, it could easily take the US economy down with it.

As Quatremer noted today, the euro has become such a powerful currency (now the second reserve currency of the world) that if it runs into trouble it would have a devastating impact not just in continental Europe but throughout the world.

Back in the 1970's when the US took the decision to take the dollar off the gold standard, the situation was watched intensely by the rest of the world. As the US treasury secretary noted at the time, "the dollar is our currency but your problem." Now, with the euro being used by a common market larger than America's, the opposite could be said to America. And the increasing grumblings suggest that American officials don't like being at the whim of decisions being taken across the Atlantic.

Who's Going to Pay?

Yesterday was “budget day” here in the UK, a day of huge significance to the British calendar and psyche with events lasting the whole week. Whereas in the US the budget is usually unveiled without a whole lot of fanfare or media attention (with the notable exception of Obama’s first budget this year), in the UK there’s a big hullabaloo around it, with the Chancellor of the Exchequer (for the most part the equivalent of the treasury secretary in the US) walking from 11 to 10 Downing Street clutching a ceremonial briefcase containing the all-important document, which will by that point already have been ceremonially presented to the Queen the day before. He then delivers an address to the parliament which is the first public unveiling of the plan, and that evening he makes a televised speech to the nation explaining his rationale. This is followed the next several nights by speeches from the leaders of the opposition parties.

It’s perhaps telling that yesterday’s budget day was so momentous and yet as usual, St. George’s Day today (England’s patron saint's day) was completely ignored. I didn’t even realize it was St. George’s Day until I happened to notice a sad little steel drum performance celebrating it in Hammersmith this afternoon while getting lunch.

Budget Day is always a big deal here, but this year it was attracting a particular amount of attention. Everyone knew that this was going to be a momentous budget, both in terms of the dire state of the economy the Labour government would have to reveal and in terms of the drastic measures everyone assumed were going to need to be taken. But despite being primed for eye-popping numbers by the bank bailouts last year, The City seemed to be absolutely shocked by the astronomical amount of debt Chancellor Alistair Darling announced yesterday. UK debt was set to reach a whopping £1.4 trillion in 2009 - equivalent to almost 80 per cent of the UK’s economy. Collapsing tax revenues, the chancellor admitted, will mean he will have to borrow £175 billion in 2009,12.4 percent of GDP. That will be the biggest annual deficit for the UK ever in peacetime.

And yet Darling seemed to offer little in the way of spending cuts or tax rises in order to pay off that debt. His announcement of a tax hike to 50 percent for people making over £150,000 may have raised eyebrows (while not uncommon on the continent such a tax rate in the UK hasn’t been seen in a very, very long time), but cynics in the UK suspected it was a cheap ploy to distract the media from the larger issue – the huge amount of debt announced. The budget included no rise in the tax rate for the middle class, and the reality is that those who make large sums of money are usually pretty adept at getting out of paying tax rises, so the 50% tax rate is likely to raise little revenue. The British media seems to have almost uniformly assumed that the Labour Party will not be in power much longer, but perhaps the real question now is what exactly will the Tories be inheriting if they take over the government next year? Eventually someone’s going to have to pay for all this expenditure, as necessary as it may be, and who is going to deliver the bad news to the middle class that they are going to have to chip in? It’s a surefire election loser, but with his plummeting poll numbers it would have been interesting to see Brown fall on his sword and broadly raise taxes to pay for the debt, knowing it would guarantee a Labour defeat in the upcoming election.

Tea-Bagging Across the Pond

Interestingly, the same issue is being wrestled with across the pond in the US. Barack Obama’s budget will allow the Bush tax cuts on the rich to expire, and will increase the tax burden on the top two percent of income earners. The rest of the population will either see their tax rate remain the same or decrease. Of course this didn’t stop legions of blue-collar “tea-bagging” protesters from turning out on the streets last Wednesday (“tax day,” in the US, a day perhaps of equivalent symbolic importance to ”budget day” in the UK) to decry Obama as a fascist who will tax all Americans into oblivion. Left-leaning media outlets have been at lengths to point out that 99 percent of the people out at those protests won’t see their taxes go up at all under Obama’s plan (although the people organizing those protests, Fox News and lobbying groups like Freedom Works – which interestingly enough also represents AIG – will). The American left used to scream in frustration that the working class was being hoodwinked by Republicans who used an appeal to social issues to get the working class to vote against their own economic interest. Now with the tea-bagging protests, the left has been observing is disbelief that Republicans now seem to be able to convince them to vote against their own economic interest based on an appeal to economic issues somehow as well. It's a strange country.

But despite the left's dismissal of them as mindless sheep, perhaps the tea-bagging protesters are on to something. While it is true their taxes aren't going up right now, they know that with the huge amount of expenditure being spent to rescue the global economy from collapse, someone's going to have to pay for it. And really, why not the tea-baggers? More than a few people have pointed out that these are the same people who enthusiastically supported the Iraq War and the huge expansion of the government with the establishment of the Department of Homeland Security. Now they're taking to the streets to protest the fact that they might possibly be asked to pay for it.

These are extraordinary times, and they will likely call for extraordinary levels of sacrifice from all people. Sooner or later, the middle class is going to have to contribute financially to solving the mess. The problem, on both sides of the Atlantic, is that nobody wants to be the one who has to tell them that.

Life In the Dark

If you've never tried eating in the dark, I highly recommend it. Last night I went to a blind restaurant here in Zurich called Blindekuh. It's an establishment where all the waiters are blind, and all the patrons eat completely in the dark, without being able to see a thing. Considering I had just been made redundant/laid off from my only steady freelancing gig an hour before we went to eat, it was hard not to see the experience as a metaphor for the state of the world right now.

I wasn't quite sure what to expect from the blind dining experience. I went with my father and some of his friends, apparently they had to make reservations for it four months ago. It's pretty wild. When you go to the table you are guided in by your waiter into a large dining room that is completely pitch black. You go through the entire meal and then are led out without ever having seen the room you were in. It's interesting how being in the dark heightens all your other senses. You suddenly become aware of the tone of people's voices, the feel of the objects around you and the taste of the food. Eating is a bit of an adventure. You have to move your hands very slowly around the table to make sure you don't knock anything over. You have no idea what it is you're putting in your mouth, so you just have to guess from the texture. Sometimes I would bring the fork to my mouth to find there was nothing on it! I speculated that it would be hilarious if there was a night-vision camera trained on us and at the end of the evening we could all watch ourselves hanging our heads over our plates, dragging our food into our wide open mouths and eating like infants. Actually, maybe that wouldn't be so pleasant to watch!

Of course I was a little distracted throughout the evening because just before we left I got a call from the web company I do my regular writing shift for saying they're having money problems and could no longer have a Europe correspondent. It's not a huge big deal as it's just one of my sources of income, but it was the only one that came with a regular daily schedule and a regular paycheck. But times are tough and I can understand why they can't afford to have foreign contractors any more. I was going to stop doing it in the next few months anyway, assuming I can find a full-time job soon. But it was a rather startling reminder of the state the world is in right now.

By my count 15 of my friends in the US and UK have been laid off in the past month (judging from Facebook status updates). They're not alone. US unemployment rose 159,000 to a record 4.78 million Americans this week. The Eurozone unemployment rate has risen to 8 percent. The predictions and analysis coming from the World Economic Forum in Davos this week have been truly frightening. And nobody seems to be quite certain of what's coming next, all they seem to agree on is that it's going to be bad.

Sitting there helpless in the dark last night, at first I felt quite anxious. But soon I realized I wasn't alone, we were all in this together. Me, my table, and all the other diners were also trying to navigate their way through this new uncertain world. But by working together, advising each other on where the obstacles in the dark lie, we made it through. By the end of the meal it almost felt normal to be eating in the dark. As we all feel blindly around the table in 2009, perhaps it will be good to keep in mind that we're all in the same boat.

It's going to be an interesting year in the dark.

Europe's Moment

The blog's been noticeably quiet the past week, apologies for that. I had two language exams for my French certification last week, and then this weekend I had a friend from London visiting. My life's been a lot busier than I thought it would be during this sojourn, non-stop French tests all week and then visitors from London on the weekends. It's fun though!

To answer the question I posed in my post last Monday, in the end the US did go ahead and follow Europe's lead on the bank buyout plan. It really has been an astounding thing to watch. Though it initially looked like the EU was stumbling in trying to devise a unified response to the crisis, over the past week that trend has been reversed and the EU has actually taken on a leadership role in the world's response to the crisis, with the United States following!

Perhaps one of the most surprising elements of the past week was to see UK prime minister Gordon Brown rise to the occasion and become the man of the hour. As BBC Europe correspondent Mark Mardell noted last week, Brown has suddenly become the leader of Europe, having devised the bank bailout plan which continental Europe shortly copied and then the United States followed. Though he initially failed to lead Europe with his first summit, French president Sarkozy's gung-ho 'throw everything at the wall and see what sticks' approach has actually served him well during this crisis. He was full of ideas when addressing the European parliament last week, saying the EU must lead in "overhauling capitalism." In fact it is Angela Markel - Germany's chancellor who is respected throughout Europe for her calm, steady and thoughtful leadership - who has really stumbled during this crisis, seeming almost erratic and lost. I couldn't help but smile when I saw Paul Krugman's piece in the New York Times last week praising Brown's leadership (on the same day that he won the Nobel prize, so it got lots of press). The UK had basically given up on Brown until last week. Now he's quickly rising in the polls, closing David Cameron's lead over him to single digits. As the saying goes, "cometh the hour, cometh the man." But how long will the praise last?

The new clout that the EU has during this crisis was in evidence at the Camp David meeting over the weekend. During this crisis the EU has some new clout and it is being wielded loudly by Sarkozy. The EU is, after all, now the world's largest trading block. And for the first time, the EU is being listened to seriously by an American president (albeit a lame duck one). Just to see the sight of a French president standing at Camp David and calling for regulatary overhaul of the world's financial system while the US president stands next to him was an amazing sight. And on his other side was European Commission president Jose Manuel Barroso, whose advice at the end of the summit that the world needs new rules and regulations and that these should be based on the European model, "not gung-ho liberalism." The fact that this is being taken seriously by the US shows how much things have changed in the past few weeks. Is this Europe's moment to take the reigns and devise a new global financial system based on European values? It seems suddenly, and unexpectedly, within reach.

Britain follows with UK Bailout Plan

Those in the US who thought the $700 billion bailout package passed by the congress last Friday was extremely unusual might be reassured by seeing another bailout unveiled across the pond - a £500 billion ($870 billion) plan for the UK. But importantly, the British bailout plan is entirely different from its counterpart in the US. Here's why.

For starters, the £500 billion figure being used by the British media this morning is a bit misleading. Though all $700 billion of the US package will be coming directly from taxpayers, only £50 billion ($87 billion) of the UK plan is coming from taxpayers money. That part of the plan will be used by the government to partially buy out failing UK banks. This is where the plan differs significantly from the one in the US. The $500bn US taxpayer-funded bailout package will be used to buy the bad debt from the ailing financial institutions to clear up their balance sheets. The £50bn UK taxpayer-funded bailout package will be used by the government to buy partial ownership in failing UK high street banks, the banks most people use to store their savings.

Additionally, because of the differences between the US presidential system and the UK parliamentary system, there is no doubt as to whether this bailout plan will become reality. It's definitely happening.

So where is the £500 billion figure coming from? Some news outlets have decided to include the other part of the plan, half of which is theoretical money being made available and the other half of which is just a larger injection than normal by the Bank of England into the money markets, in the headline. £200 billion will be coming from the Bank of England under its existing Special Liquidity Scheme. The Bank of England always injects money into banks under this scheme, although now it will be putting in much more money much faster. Additionally, the Government is making £250 billion "available" for banks to guarantee medium-term debt in a bid to encourage banks to start lending to each other again, although so far the banks have said they won't use it.

Brown said that the £50 billion investment by the taxpayers will yield a return on the investment, as is being claimed in the US. Like in the US, Brown seemed to be throwing the financial philosophy of the ruling government (in this case New Labour) out the window in order to urge the new plan. "This is not a time for conventional thinking or outdated dogma but for the fresh and innovative intervention that gets to the heart of the problem," he said this morning. This language perhaps struck more than a few people as unusual this morning, as that "outdated dogma" was developed and followed by Brown himself when he was chancellor under Tony Blair. Such quick philosophical rethinking echoes the language that has been being used in the US about the Anglo-Saxon model of free-market capitalism.

The two men said the government had been working on this plan for weeks, but has chosen to unveil it now because of the market meltdown which took place yesterday, in which the high street banks plummeted on the UK stock markets. My bank, for instance, lost 40 percent of its value in the course of yesterday, making me feel quite nervous about my savings. This morning's announcement seems to have had a small rallying effect on the UK markets - for now.

European Plan?

So now that the UK has become the first EU country to come up with its own bailout package unilaterally, does this mean any talk of a pan-European bailout fund is dead in the water? Not necessarily, said Brown. The prime minister also announced that the UK has put forward ideas this morning for a pan-European funding plan. Yet he still ruled out extending the UK's savings account guarantee to cover all deposits, even as other European nations are scrambling to do so.

The fact that Brown didn't have much else to say about a pan-European response probably means that coordinated action is unlikely, which may mean that his announcement does little to calm the European markets in the long run. The market turmoil over the past two days was largely in response to the fact that the EU seems to have disintegrated in response to the economic crisis, with each member nation taking drastic unilateral steps which seem to conflict with one another. As Swedish finance minister Anders Borg told reporters in Luxembourg yesterday, "One country's solution is another country's problem.'' Though Brown's announcement this morning may temporarily calm the British markets, it may send the continental European markets into even more turmoil, and by tomorrow the beneficial effect of the announcement for UK trading could be overtaken by continues fears about the lack of a coordinated Europe-wide response.

Europe's Economic Solution: National or Federal?

As the US Congress debates today over the new version of the bailout bill, Europe is also scrambling to come up with solutions to the crisis which, although not of their making, has come to their shores. Despite overconfident assurances even recently that Europe would be immune to the American economic plague, it is clear now that the old world will be affected and there is consensus - unlike in the US - that drastic government action will be needed. But who should take the action? Right now the big debate raging is this: should there be a coordinated EU-level effort to deal with the crisis, or should each country deal with it in their own way tailored to their own situation?

It is not a simple question, and goes well beyond traditional euroskeptic/eurofederalist divisions. With the way the EU is currently set up (and while it still runs on the pre-Lisbon Treaty system), it would likely not be able to act quickly enough for any kind of big pan-European action like the US's bailout bill. But on the other hand, if each county just does it's own thing it could result in chaos and conflicting actions, particularly for the countries within the Eurozone that use the same curency and are regulated by the European Central Bank.

The pitfalls with the 'every man for yourself' plan were already seen earlier this week when Ireland went ahead unilaterally in implementing a savings guarantee program for its banks (similiar to the FDIC in the US) without notifying Brussels. The EU was not too pleased about that, but Irish politicians said that consulting Brussels would have taken too long and the government needed to act quickly. However right after they did it other European countries, most notably the UK, filed objections, saying it gave Irish banks an unfair advantage over other ones. Many Irish banks operate in the UK and it is thought consumers might rush to move their money into UK-based Irish banks because their savings guarantee is higher.

On the other hand, other European governments have banded together to take action. Fortis received its bailout from a coalition of Belgium, the Netherlands and Luxembourg, and France, Belgium and Luxembourg together bailed out Dexia. And there's been plenty of other activity, reflected in this chart from McLatchy-Tribune above.

The sense of urgency aroud this issue has grown incredibly strong as new data suggests that a recession could be near in Europe's major economies. French President Nicolas Sarkozyis holding a summit tomorrow here in Paris with the other European members of the Group of Eight (UK, Germany and Italy) to reach some consensus on the reforms that are needed. The idea is that they should present a united Europan front when they meet with the larger Group of Eight shortly. But some other EU countries are not too happy about being left out of this meeting, most notably Spain which now has a larger economy than Italy but is not in the G8.

Already the EU has laid out the regualtory changes it is going to make to improve supervision over European banks that operate internationally, but this won't do anything to bail out banks and other financial companies that may fail in the coming weeks. One of these future changes, for instance, will be a requirement that people who sell loan packages must hold at least 5 percent of the investment.

However this works out, one thing is clear. This is new territory for the EU. Of course, globally this situation is quite new and is on a scale that hasn't been seen since the 1930's. But in Europe in particular, there are new institutions and new relationships that haven't been tested like this before. Will the EU be able to deal with the crisis effectively? Or will the magnitude of the problem be too much for the fledgling international body to handle, and will the solutions have to fall primarily on the national governments?

Europe speculates on end of US 'Empire'

Watching the live coverage of the US house floor Monday night in Paris was a truly surreal experience. On my cable system I get both French and British news station, and every station from both countries was carrying live minute-by-minute coverage of the vote on the bailout package, waiting in suspense and watching the vote tally. When the bill didn't pass, there was absolute panic over here. The news anchors were absolutely shocked, as were the commentators.

It really underlined how much the European economy still depends on the American economy. As Angela Merkel pointed out yesterday, this crisis is a problem created by the United States, and the United States is the only one who can solve it. So Europe is now in the position of having to sit back and wait for the United States to take some action as it reels from a painful crisis that is not of its own making. As the saying goes, when America sneezes, the world catches a cold. But what happens when America refuses to take any medicine?

Bank Bailouts Come to Europe

Though just recently the European Central Bank said smugly that Europe would never see the kind of bailouts currently going on in the US, as many as predicted it now seems clear Europe will not be immune from the crisis. Yesterday brought the news that Belgian-Dutch group Fortis is being nationalized by the Benelux nations and British mortgage lender Bradford & Bingley is being nationalized by the UK government.

Though the UK was the first country to see a big bank bailout with the nationalization of Northern Rock, since the US institutions such as Lehman Brothers and AIG started started dropping like flies, Europe's banks had held firm. But no longer. Fortis is the first major continal European bank to falter.

Now analysts are saying the next phase of bank bailouts are likely to be seen in Europe. Joseph Kraft, head of Japan capital markets at Dresdner Kleinwort, told Reuters today,"It's definitely moving towards Europe. It's the beginning of the end and a necessary step, so we should see more institutions nationalised, absorbed or going into default."

At the same time it appears the US congress has been able to work out a deal with which they can approve the $700 billion bailout plan for the struggling banks.

Global Economic Crisis: France to the Rescue?

Over the past week I have been wondering if the current global economic meltdown, caused in part by the lack of US regulation over the financial services industry over the past decade, would have an impact on the way Europe's political winds are currently blowing. Judging from French president Nicolas Sarkozy's speech in Toulon yesterday, it would appear that for its part at least, the French right does not intend to scale back its ambitious plans for liberalizing reforms in France. But at the same time, Sarkozy intends to use the example of the crisis to sell to the Anglo-Saxon world a more Gallic system of economic regulation. The jist of his speech, it would seem, is that he wants to bring France's economy more toward liberalization and to bring the UK/North American economy more toward regulation, and perhaps the two can meet in the middle.

The past few years in Europe have seen a fundamental shift toward the right, as Europeans grow anxious about generous social welfare programs that now seem unable to sustain themselves over the long term. First, Angela Merkel's Christian Democrat party wrested power from the socialists in Germany through a coalition goverment. Then Nicolas Sarkozy handily beat the socialist candidate Segolene Royal in the French presidential election last year. Italy's brief period with a leftist prime minister came to an abrupt end earlier this year with the return of Silvio Berlusconi. And in the UK, Conservative leader David Cameron seems likely to lead the Tories to a victory over Labour whenever the next election is called. The only big outlyer is Spain, where socialist prime minister Jose Luis Rodriguez Zapatero ousted the conservative government a few years ago and is still standing strong.

Both Merkel and Sarkozy have made reforming the country's social models a priority - undertaking a liberalization program for the economy. Sarkozy's has been the most aggressive. So with the near collapse of the credit market in the US exposing flaws in the free-market capitalsm that has prevailed in the Anglo-Saxon world over the past decade, I've wondered whether the ascendancy of the European right might be finished.

But Sarkozy seems to be quickly repositioning himself in the face of the crisis. The man the French left has dubbed "Sarko l'Americain" lambasted the US-inspired lack of regulation in the last few years yesterday, saying that the extreem free-market deregulation undertaken by the Bush adminsitration, "was a folly whose price is being paid today."

In his speech yesterday he warned Europe that it cannot escape shock waves from the US financial crisis and that to protect its future, it must take the initiative in rewriting worldwide banking rules to end the "folly" of an under-regulated system he said is now "finished."He said that at the EU's next meeting he would, as the current holder of the European presidency, propose swift action for the EU to tighten controls over European banks. And he said that the world's major parties should gather at a special summit before the end of the year and develop an entire new monetary and financial framework to replace the U.S.-dominated Bretton Woods system set up in 1944.

So, I wouldn't count the European center-right out yet. After all, their opposition, European socialism, is largely adrift ideologically these days. If the European center-right can position itself as the political movement that can look out for Europe's interests during this crisis and strongarm the US into increasing regulation, it could end up even stronger from this crisis than it started. I have yet to see any reassuring plan of action from Europe's socialists.

The Blame Game

As the global financial system falls apart around our ears, a few things have stuck out to me in the way that politicians in the US are reacting to the crisis. One has been the incredibly bizarre words coming out of John McCain's mouth in response to this disastrous week. Suddenly he's lambasting a "culture of unrestrained greed" on Wall Street and urging greater oversight. This is from a senator who has been one of the biggest champions of unbridled free-market capitalism throughout his decades in the senate. Has the world gone topsy-turvey? This may be what a paniced American population wants to hear right now, but it is clearly not the way John McCain truly views how the economy should be run.

I mean who would have thought they'd see the day that Hank Paulson, who is as aggressively free market as you can get, would be leading the kind of bailouts we're seeing today. He has to, the government doesn't have a choice in these circumstances. But it's truly bizarre to see John McCain blasting "unrestrained greed" on Wall Street as causing the current crisis when he and his party have led the charge to unrestrain that greed over the past ten years.

Beyond that, I think there is something culturally interesting about the language both candidates are using about the crisis, language which shows that no matter which candidate is elected in November, the US is unlikely to address the fundamental problem it faces any time soon.

Big Bad "Washington"

Both candidates are blaming the crisis on purely conceptual factors like "Wall Street Greed." It is symptomatic of the way the entire campaign has been phrased. The many problems America currently faces are the fault of "Washington," "terrorism," "lobbyists," "oil companies," you name it. In fact if you listen to American politicians, the one group that doesn't share any blame for the country's problems is the American people themselves.

But this argument is not only illogical, it's also unproductive. The dirtiest word during this election campaign has probably been "Washington." This is nothing new. Each election since Nixon has been presented to the American public in this way: Washington is broken and we need an 'outsider' or a 'maverick' to change it. It's how Reagan, Clinton and Bush were all elected. But this year the anti-Washington rhetoric seems to have hit new heights. And yet, what is Washington? Washington is a creation of the people, full of democratically elected politicians who the American public put there. Washington is, therefor, a reflection of the US population. So if there's something wrong with Washington, then there's something wrong with the US public.

The current economic troubles have been presented in the same way, as if it's all conceptual factors that are affecting the blameless American people. Nowhere was this more evident than when John McCain made the bonehead mistake of repeating his "the fundamentals of the economy are strong" line in Florida Monday morning on the day of the Lehman Brothers collapse. Rapidly going into damage control mode, he quickly shifted his wording later in the day to say that the 'fundamentals' he was referring to was the 'hard-working American worker.' Beyond being a laughable backtrack, it reflects the fundamental problem with the way American politicians are dealing with this cris. They're not being straight with the American people, because they won't tell them that it is the people who are to blame.

Debt Addiction

The American economy has been fundamentally operating on borrowed money for decades now. From the most microeconomic level (Americans now have a negative rate of average savings) to the most macroeconomic (the national debt is at a record high level), America is addicted to spending money it does not have to fund an opulant lifestyle. And it isn't just consumer debt like credit cards that has saddled the American people and the American economy. People took out mortgages that they couldn't possibly pay back, thereby spurring the mortgage crisis. People took out student loans that they knew they wouldn't be able to pay back for 30 years (I'm one of them). A combination of a lack of government oversight and assistance and Americans own culture of greed and vanity has pushed the country into a system where it lives far beyonds it means.

The average family debt in America is around $30,000, and that's not even including mortgages and student debt. The average college graduate from a private university leaves school with $60,000 in debt (Me? I had $120,000 in debt by the time I finished grad school). And how does Americans' -0.2 percent rate of savings compare our rapidly emerging superpower rival? In China, the average savings rate is 20 percent.

Jimmy Carter was the last president to touch this issue with a ten foot pole, in a speech he gave shortly before he lost the election to Ronald Reagan. The speech, widely called the "malaise" speech because it seemed defeatist, is widely credited with losing the reelection for Carter, who was defeated by Ronald Reagan who promised the American people "morning in America" with an endless luxurious lifestyle. Reagan then plunged the nation into an unprecedented level of peacetime national debt.

America has a problem. It is addicted to spending money, and resources, it does not have. The only solution to this problem is for Americans to stop spending what they don't have. But no politician is willing to say that. Instead, everyone in government is blaming the ethereal concepts of "Washington" and "Wall Street." And while much of this crisis can be blamed on the deregulation that a Republican congress has championed over the past 15 years (and that New Democrats rubber-stamped), most of it can be blamed on Americans' spend today, worry about it tomorrow lifestyle. The only real solution, for people, government and business, is to live within our means.

But per usual, when something goes wrong with the United States, it is never the fault of its citizenry. When a hijacking disaster came to its shores, it was blamed on the ethereal concept of "terrorism" rather than American foreign policy or the isolationism of its citizenry. When George W. Bush was elected - twice - it was somehow the fault of some larger "Washington" system rather than the fault of the voters themselves. And now, with the financial crisis, once again we see that Americans are refusing to look in the mirror and take responsibility for their own culture and their own lifestyle.

Self-Efacing Europe

I can tell you that this contrasts sharply with how Europeans view their own problems. When I speak with Europeans about the problems plaguing Europe, and the inability of the continent to address those problems, they throw their hands up in the air and give a morose explanation about how Europeans have petty rivalries and nationalism that make them unable to cooperate, or how they are are rendered complacent by their generous social welfare systems, or how the people of Europe lack any significant ambition or direction. They don't blame their concepts on etherial concepts, but rather themselves. They could never be as sucesful as America, so many of them say to me, because Europeans don't have the same drive for success.

In the end, I'd say Americans could do with a lot less self confidence and Europeans could do with a lot more. Americans inability to take personal responsibilty and tendency to blame vague concepts for their woes has gotten them into a quagmire in which they are unable to come up with real solutions to their problems. Europeans' lack of self confidence and their acceptance of a storyline that paints them as lazy and complacent makes it difficult to achieve any new success.

Maybe America has some extra swagger it could loan to Europe for awhile.

Will the US recession spread to Europe?

As Wall Street opens after the Martin Luther King weekend, the world is waiting with baited breath to see what happens after the opening bell. The US traders had the day off yesterday, but rather than relaxing they probably spent it in horror as they watched markets across the globe plunge amid fears of a US recession. Markets in Europe suffered their biggest one-day losses since the September 11th attacks. When trading opened this morning in the East the Asian markets took an absolute nose dive. In response the US Federal Reserve made an emergency rate cut early this morning US time, an eye-popping three-quarters of a percent. It helped the European markets bounce back slightly but it was too late for the close of the Asian markets.

So far it doesn’t seem to have done the trick for this morning’s Wall Street trading, probably the most closely watched in years. The Dow fell immediately after the bell, dropping 441.72 points at one point. The Nasdaq and S & P 500 were down more than 3 percent just in the first half hour.

All of this of course is in response to a panic over the fact that the US is either about to enter a recession or it is already in one, sparked by the subprime loan crisis. But aside from the markets, how vulnerable is the rest of the world to this coming economic crisis in the US? The subject has been the topic of much speculation in Europe over the past week.