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Strategies & Market Trends : Booms, Busts, and Recoveries -- Ignore unavailable to you. Want to Upgrade?

To: smolejv@gmx.net who wrote (21694)	7/26/2002 2:12:08 AM
From: smolejv@gmx.net	Respond to of 74559

ECONOMY - front page article Zeit 25.07.02 Der Weltbankrot - the world bankruptcy Bankruptcies, market lows, fear: Still, European Union and USA can save the economy By Uwe Heuser Each disaster film ends in such a scene: A series of explosions drives the world to the abyss, and the future hangs frayed rope. Except that this summer it was not Hollywood that produced the most exciting Cliffhanger, it was the world economy. And at the beginning of this week another fiber in the rope tore again. The American telecommunications giant Worldcom announced the largest bankruptcy in history and causes the world markets fall. It is been a mistake to assume, that the failure of the fraudulent energy company Enron was the worst that could happen. Further collapses are to be expected. The confidence crisis of American capitalism is as deep as the Atlantic - and president George W. Bush, who once scored Fs for his businessmanship, may be considered as the most unfortunate casting for the role of re-establishing the faith in the honesty of the industrial leaders. An American crisis means nothing but a world crisis. Every crash on Wall Street releases earthquakes on European and Asian stock exchanges. When assets melt away as fast as ice cubes on the heating plate, then local life insurers also cannot hold their promises any longer. And each large failure in the USA hits international financiers directly - Worldcom alone costs the Deutsche Bank a quarter billion euros of red ink. Nevertheless: the rope still holds. The big-.board shares in the USA have lost one third from their tops, alone because of Worldcom the stock exchange lost 120 billion dollar in value, but the consumers defy the stock exchange disaster. Their inclination to buy, increased by the outlook of tax gifts from Washington, let the economy in the first quarter grow 2002 at an annual rate of more than five per cent. One more encouraging sign: The American industrial production has been continuously on the rise since beginning of the year. But if there's no end to the course slide, if one uncovered scandal seems to point to one hundred hidden, then even the most enthusiastic shoppers will eventually lose their appetite. In this case it can happen that USA - and then also Germany - , after the fast recuperation from the downtime last year will end in a genuine recession. After the terror attacks of 11 September America inflated its economy without any consideration for losses. Bushs tax-cutting orgy and gigantic extra economic and military expenditures force the state, which had surplus since 1997, to make at least 160 billion dollar new debts this year. That would be no problem, if the private sector did not already live on credit, provied by the rest of the world. However in the first three months the current account balance of America went more than 112 billion dollar into the red - a record. If America starts to weaken in this situation, the gentle slipping of the dollar rate will fast turn into a crash. The US economy would get into financing straights, and German exporters would have to look around for new markets. The fact that the optimistic Americans drove their real estate prices into eery heights, does not make the situation any easier. A new bubble? The prices are still on the rise, because low mortgage interests attract always new house buyers - just for how long? No time for malice Now the real estate boom, which is taking place first of all in urban centres such as New York and San Francisco, can not be compared to the moon prices, that prevailed at the end of the eighties in Japan. Therefore it's only unfavourable voices who can predict the same languish of many years for the US economy. American capitalism is not at all at its end. Its strength, in contrast to the Japanese consent model, is its ability to react in a radical fashion to crises. It proved that last time in the eighties, when Europe and Japan seemed to be leaving it behind, just to ascend to the champion of the computer revolution. The experience is, however, that it takes time for reason to prevail in Washington. George W. Bush must not only avoid the national debt shoot up uncontrolled. The president also knows the bad manners of Corporate America. He should change the rules, so that the competition functions again. New balance guidelines must force the enterprise bosses to care. Share options should not be the only incentive for the management. The supervision of the management must become stronger. And the financial control must be able to work independently of lobbies. During an apparently endless upswing the USA have not cared a bit about European interests. The dollar could not be expensive enough to Americans. Now both sides need each other again. The state banks can catch the falling dollar only if they intervene together in the market and co-ordinate their interests. The weak Europeans have no time for malice. Germany let the time of the American upswing pass by without drawing its own strength out of it. The over-regulated and over-subsidized national economy depends more strongly than any other prominent economic power on the external demand. During this short period of German stock miracle the stock exchange culture could not establish itself in Germany. So the Germans must fret, along with others, during the Cliffhanger of the world economy, although they have neither larger scandals nor speculation bubbles to report. And what do we hear from the chancellor Schroeder, what do we hear from the European Union and the European central bank? If ever a special summit with the Americans is needed, it is needed now.