Thursday, October 9, 2008


This is more than a global financial meltdown: Other major nations around the world this week are following President Bush‘s lead in effectively dismantling the very structures of free-market capitalism.

The Federal Reserve announced it was going to lend money directly to struggling companies. This is a level of state intervention that neither Herbert Hoover nor Franklin D. Roosevelt, the two presidents in office through the decade-long Great Depression from 1929 through 1939, ever dared to do.

The British government announced Tuesday it was, in effect, nationalizing the nation’s major banks — in many respects, a far more socialist action than anything the Labor government of 1945-51, the most left-wing in Britain’s history, ever dared to do.

In the United States, the Federal Reserve took another deep gulp of the only fiscal medicine Mr. Bush has ever practiced - slashing interest rates frantically yet again.

At a time when U.S. interest rates actually need to be in double digits to restore international investor confidence in the very viability of the federal government and its plunging currency, the dollar, Fed Chairman Ben S. Bernanke instead slashed rates back to a rock-bottom 1.5 percent.

Even worse, panic-stricken central bankers around the world joined the Fed in its interest rate slashing frenzy. For the first time in history, a wide spectrum of central banks, led by the European Central Bank (ECB) and including Britain, China, Canada and Switzerland, slashed their prime rates as well. The ECB cut its rate from 4.25 percent to 3.75 percent.

U.S. savings and retirement plans now are reckoned to have lost $2 trillion — that’s trillion, not billion — or 20 percent of their value over the past 15 months.

The interest rate cuts are one more weapon thrown at the problem in what has become a daily series of measures looking for the one that finally turns the tide.

Stock markets worldwide fell Tuesday, with Japan’s Nikkei losing 9.4 percent of its value.

Japanese Prime Minister Taro Aso announced that next month’s elections would be postponed, and he also delivered the most honest and accurate statement by any world leader about the whole catastrophe: “Honestly, this is for us beyond imagination. We have huge fears going ahead.”

Russia’s two stock exchanges both closed early Wednesday, having reopened just long enough to lose 14 percent and 11 percent, respectively, of their indexes’ value. The Dow Jones Industrial Average lost 508 points Tuesday. Pretty soon, Mr. Bush may have to use that toxic word “recession” after all.

In fact, the best the outgoing and financially discredited U.S. president could do would be to keep quiet. Around lunchtime Tuesday the Dow was yo-yo-ing around 100 points down on the day. Then Mr. Bernanke and Mr. Bush both made speeches, and the Dow resumed a determined slide down to minus 500. The correlation was hard to miss.

Mr. Bush should have heeded the words Shakespeare gave King Lear to the effect that as long as you can say this is the worst things can get, they can get worse still.

The winner of this year’s Nobel Prize in economics, scheduled to be announced Monday, can rest assured of his unprecedented popularity. It doesn’t matter if the laureate’s field isn’t world economics; every possible oracle is being quizzed.

French President Nicolas Sarkozy suggests a meeting of leaders, which Mr. Bush signaled he was ready to host. In fact, such meetings during times of fiscal crisis almost never do any good, even when they are hosted by serious leaders with fiscal competence and prudence who are widely respected. And Mr. Bush does not possess a single one of those attributes.

With a curious sense of timing, depressed Wall Street executives could go home Tuesday night and watch on U.S. cable TV channel Turner Classic Movies the 1967 film “Bonnie and Clyde” - about a gang of bank robbers. It wasn’t too different from watching the 24-hour news channels, just not as garishly lit.

• Martin Sieff is chief political correspondent for United Press International.

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