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Made in America? Perhaps, But We're All in This Together

Wednesday, Oct. 1, 2008

Judah speculated about how European "outrage" over the U.S. financial crisis may affect the Afghanistan mission.

John McCain and Barack Obama have milked the "main street vs. Wall Street" narrative for political gain (never mind the significant contribution of main streeters who got in over their heads), so it is no surprise that European politicians are eager to point the finger across the pond, even if, for example, no one forced the European banks that are now in trouble to invest in the toxic securities that are now on their balance sheets.

Angela Merkel sharply criticized the U.S. House of Representatives' initial failure to pass the $700 billion bailout plan, and the European commission took pains to point out that the crisis originated in the United States and said the U.S. bears a "special responsibility" for fixing it. EU Trade Commissioner Peter Mandelson was among the European officials who tended more toward the demagogic in their remarks.

Bloomberg news reports that "European politicians are discovering what cometh after pride":

A week after lambasting the U.S. for allowing its banks to run out of money and after resisting calls to set up their own rescue mechanisms, leaders across Europe yesterday bailed out banks from Belgium, Germany and the U.K. Dexia SA today received aid from France and Belgium, while Ireland's government said it would guarantee bank deposits and debt for two years.

Nicolas Sarkozy, meanwhile, was slightly more constructive in his approach, according to AFP. Sarkozy is one of several European politicians and central bank officials who are now calling for a financial rescue plan that is global in its scope, even if that will have to wait until after the U.S. bailout.

European Central Bank President Jean-Claude Trichet said the U.S. Congress must pass the $700 billion bailout bill "for the sake of global finance." The ECB can't put together a bailout of its own because "we are not a fully-fledged federation with a federal budget," Trichet said. "Each country has to mobilize its own efforts,'' the European central banker added.

And what of Asia? Gideon Rachman in the Financial Times says that "[t]he success of the Beijing Olympics in August and the failure of Wall Street in September has been a boost to Chinese self-confidence."

"Whatever the long-term economic impact on Asia of America's financial crisis, a psychological shift is already evident," Rachman writes.

Fair enough. But, while it may make sense psychologically, this view of international economic competition as a sort of zero-sum game isn't very much connected to the reality of how the system functions. As Rachman rightly points out, there's little reason to believe Asia could better weather a prolonged world economic downturn than the United States.

In other words, my friends, we're all in this together.

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