USA: Last Man Standing
America’s relative decline in global affairs has been foretold many times, but it never quite seems to happen. Today, the rest of the world is looking to the United States to pull it out of a recession (or depression), even though many countries also blame us for having started it. The truth is this: The worse things go for the world as a whole, the more the United States gains in relative power and influence. Maybe that sounds counterintuitive, but it has happened before. After the first and second world wars left many other parts of the world in devastation, the United States rose in relative stature. It fell in standing, at least arguably, during the years between 1989 and 2007, when the world as a whole was enjoying unprecedented prosperity and liberty. In the terminology of financial economics, the United States is, relatively speaking, a counter cyclical asset. It’s not that America profits from bad times or war but that we have a relatively greater capacity to limit our losses and eventually bounce back. We are “built to fail,” so to speak.
Part of the problem for Europe is that its biggest banks are very large relative to the economies of their host nations—in other words, its component national economies are too small. The major Austrian banks, for instance, have loans to eastern Europe equal to as much as 70 percent of their country’s gross domestic product. The two largest Swiss banks, taken together, have assets four times larger than Switzerland’s GDP. Even in the relatively large economy of Germany, the liabilities of Deutsche Bank have been measured at 80 percent of German GDP. These banks have grown too large to be handled or bailed out by their national governments. In the United States we talk about institutions that are “too big to fail,” but in many parts of Europe it might be more apt to speak of those “too big to be saved.”
Note EU-Digest: "Here we go again with finger pointing...lets get real - it has nothing to do with Europe or the US, its all about the financial system ( a major component of Capitalism) as we know it that has failed, because it was not regulated. It needs to be fixed otherwise it will self destruct."
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