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Kultur Dokumente
Contd).
The period 1980 to 2007 saw: Rapid acceleration in Globalisation of Trade and Investment as Fcy controls lifted and FDI encouraged. Open trade fostered huge export surpluses in Asian countries, and contributed substantially to fast GDP growth in China, as well as LA countries (Brazil, Chile). Easy US monetary policy created low interest rates everywhere, while growing Trade, based on comparative advantage of labour costs, helped contain global inflation. Private sector everywhere increased its economic presence very significantly, and Investment levels as % of GDP rose to 35% in India, and 50% in China.
Contd).
High productivity gained from globalisation of Supply-chains, improvements in cost and quality. Most regulation made light-touch, particularly in Financial markets, encouraging huge capital accumulation in Stock Markets and Real Estate. The period 1980 to 2005 may be termed the Golden Age of the Washington Consensus.
Contd).
Banking crises post 1980: 81-85: Latin American Debt crisis, eventually supported by IMF/IBRD/US, via Brady Bonds. 89-92: US recession brought about by collapse of S@Ls/RE market/Leveraged debt, eventually paid for by Govt bailouts at taxpayer cost. 93-03: Japanese lost decade, long recession brought about by Bank overlending against Stocks/RE; GOJ had to support, Govt debt rose to 200% of GDP. 94: Mexican debt crisis: US Govt arranged $50bn bailout, incl. IMF, primarily to support US Banks and NAFTA. 97: Asian Crisis: overborrowing from foreign Banks, by banking systems in T/I/K, during fixed exchange rate regimes; devaluation caused huge losses: eventually, IMF stepped in with highly controversial programme.
Contd).
Others: Russia;Argentine;Turkey. In all cases, Market was unable to regain balance without Government support. Costs of crises were substantial. Yet US/UK/Euro regulators- in particular the US continued to relax restrictions on Banks/FIs. Rejection of appointment of Regulator for Derivatives, by the US Fed and major US Banks, contributed substantially to the 2007 Financial crisis. Costs of bailouts undertaken by Governments post 07 and still continuing in Europe exceed $2trn, plus lost growth between 1% and 2% of GDP for US/UK/Europe.
Conclusion:
Has Keynesianism come back? If so, than why the austerity pressure on Southern Europe? If not, then how is huge Government intervention in the bigger Western economies explained? The fact is that the world is moving away from blind confidence in self-adjusting financial markets, and Banks will be managed more as Public Utilities than freewheeling private entities for the near future.