Unless your name is Mitt Romney, this is terrifying.
The head of the World Bank yesterday warned that financial markets face a rerun of the Great Panic of 2008.
On the bleakest day for the global economy this year, Robert Zoellick said crisis-torn Europe was heading for the ‘danger zone’.
Mr Zoellick, who stands down at the end of the month after five years in charge of the watchdog, said it was ‘far from clear that eurozone leaders have steeled themselves’ for the looming catastrophe amid fears of a Greek exit from the single currency and meltdown in Spain.
The flow of money into so-called ‘safe havens’ such as UK, German and US government debt turned into a stampede yesterday.
In Berlin the two-year government bond yield fell below zero for the first time, with the bizarre result that jittery international investors are now paying – rather than being paid – for lending to Germany.
There was a raft of dismal economic news from around the world, with manufacturing output falling in Britain and Europe, unemployment jumping in the eurozone and America, and fast-emerging economies such as Brazil and China showing signs of running out of steam. …
Mr Zoellick warned that the coming months could be as bad as the collapse of US investment bank Lehman Brothers in 2008.
He said: ‘Events in Greece could trigger financial fright in Spain, Italy and across the eurozone. The summer of 2012 offers an eerie echo of 2008.
Money quote: “Eurozone leaders need to be ready. There will not be time for meetings of finance ministers to discuss the outlook and debate the politics of incrementalism. In panicked markets, investors flee to safe assets, sparking other flames.”
Anyone out there think Eurozone leaders are ready, or have any reasonable prospect of becoming ready? Or that our policymakers are, for that matter?
Anyone? Anyone? Bueller?
#PANIC!
No. They aren’t ready. I think we’ve established this.
Best cast scenario? I think: the Euro breaks up. There are shocks and after shocks. But they don’t affect the US, because the panicked Europeans start buying up US Treasuries because WHAT ELSE IS THERE?!?!?! Our banks and institutions have quietly been preparing for this, and are much less entangled with the European system than we assume (and as they were 2 years ago when it started to become a possibility that the Euro was shaky). Europe goes through some BAD STUFF. But in the end, the transition from the Euro to local currencies goes fairly well. The emerging world does OK during this. A variation on this is that several basket cases leave the Euro, several strong economies stay together in some sort of neu Euro thingamajig.
I doubt that rosy scenario is what happens, though. We’re probably way too entangled, and there was no way to get us separate. Our banks start having . . . issues. The emerging world has been showing signs of slowing – they aren’t there to pick up the slack. We then have mass hysteria. Dogs and cats living together.
My biggest fear is that we get horrid ideologies into power. Welcome back Nazis? (Not in Germany this time, but elsewhere.) Also, that this economic destabilization ends up destabilizing politics – and we get people in power in some places who aren’t afraid to invade other countries. That’s when things get really dicey.
Question: shall we man the barricades together? Aren’t we all glad Les Miserables is coming out? Because that could be reality soon. “Can you hear the people sing? Singing the songs of angry men . . .”
Also: time to blare some Kenny Loggins: “HIGHWAY TO THE DANGER ZONE!”
I have found myself pondering what dear old Uncle Vladimir I, Tsar of the Russias is thinking about these days……..
If you weren’t in #PANIC when the fascists won 14 seats in the last Greek election then I don’t know what to tell ya. That was your canary, in my humble opinion.
@1
“Not in Germany this time, but elsewhere.”
The country you’re looking for is Hungary. So far, that’s probably the country sliding away from democracy the fastest.
@4
Probably oil and gas, mostly.
@5
“when the fascists won 14 seats in the last Greek election”
Radical parties of various sorts (and 3rd parties overall) winning seats is actually not uncommon in Europe. The general political turmoil over there is obviously troublesome. I think it’s too early, though, to predict any durable political outcome in Greece. The center isn’t holding, but it doesn’t look like any particular radical group is snowballing yet, either.
I think they’ve lost that lovin’ feeling.
One way or another, the whole Euro crisis is going to be with us for most of the next decade. It’s not just about whether Greece stays or goes from the Euro. The bailouts for Greece, Portugal, and Ireland were all done in such a cheap way as to require future bailouts for each country (in all but the rosiest economic scenarios). There’s also a dangerous web of fuck-uppery among various governments and banks in the Eurozone.
I really think the crisis could be solved by effective political leadership in Europe. Which basically means it won’t be solved. I’m anticipating a decade of ugly news from the other side of the pond.