> And suppose the next recession in the US will coincide with giant economic
> and political turmoils in Asia + Russia?
The possibilities of global mayhem just keeping multiplying, don't they? The house of credit cards neoliberalism built is going to be in for a rough ride, no doubt. But I can't imagine that the global power elite would sit back and let the collapse of the American bubble wreck the world economy. Far more likely is a nasty drop in US stock markets and the dollar, as the US de-bubbles and the euro and the yen begin to attract footloose American capital in search of high returns. Interestingly, it's not just we wild-eyed revolutionaries spinning such scenarios; there's an op-ed piece by David Roche in the May issue of Euromoney (he's a regular columnist there) which predicts a 30-40% decline in US equity values and a simultaneous crash of the US dollar. The Economist also weighed in with a recent article forthrightly proclaiming the US to be in a financial bubble, requiring immediate tightening of interest rates by the Fed.
But who knows. One thing's for sure: the EU isn't exactly sitting on its ass waiting for the Pax Americana's other shoe (the one made in China, hanging on a shaky-looking currency peg) to fall. A couple of weeks ago I cross-posted a quote form the European Investment Bank, which stated that the EIB was going to spur the development of euro-denominated issues. They've done just that: the same issue of Euromoney referred to above pointed out that the issuance of euro-denominated securities has exploded in recent months, hitting a new high of 49.6 billion euros (about $55 billion US) from January to March of 1998. If this pace continues, the euro market will clock in at 148.8 billion euros, or around 10% of global securities issuance; if it accelerates, as is more likely, the percentage will go even higher.
The borrowers are a who's who of debtors, from the Ukraine to Brazil and back again. So the world's credit system is literally being de-dollarized and re-euro-ized in front of our very eyes. You've got to wonder how long the Japanese are going to stand for this -- but then, maybe they've got other problems right now.
-- Dennis