A systemic crisis, especially a global one, is not a sudden process. It is on the contrary a progressive phenomenon that can be anticipated through the analysis of certain indicators that reveal growing weakness in the international financial system, ruptures of sub-systems and attempts by some strategic players to manipulate or conceal the main indicators. Indeed, when a crisis of this scope is triggered, such players can only control one factor (and they may not even be able to control this factor) – the precise moment when the public become aware that the system is in a crisis.
When a company is about file for bankruptcy, the managers tend to first warn their friends and closest partners whom they fear not to warn. However these same managers tend to keep creditors, suppliers, costumers, and employees,… in the dark as long as possible so that they learn about the bankruptcy at the same time as everyone else, through the media.
According to the LEAP/E2020 team, the leaders of the US and some financial leaders around the world are acting exactly in this fashion.
These are the nine indicators that the systemic crisis has already begun:
- 1. The US government has been in technical default since mid-February 2006, because the debt ceiling authorized by the Congress has been breached. The US government has suspended sales of “State and Local Government series (SLGS) non-marketable Treasury Securities”. US Treasury Secretary John Snow announced that, if Congress has not approved an increase in the statutory debt ceiling by USD 800 billion by mid-March (i.e., 10% of the current ceiling of USD 8,200 billion, which has already been raised twice in the past three years), the technical default will become very problematic. This announcement is particularly worrying that given Congress has not made a decision and does not even seem wiling to tackle the issue for fear of a disastrous psychological impact on
Republican voters in the upcoming November elections and on foreign purchasers of US Treasury Bonds. In the same way that it was decided to stop publishing M3, it is a possibility that the exact amount of the US public debt will no longer be calculated. These combined trends reinforce the loss of confidence in the value of the Dollar, Treasury Bonds and in the US economy in general. They also illustrate the complete lack of political and budgetary leadership within the current US administration.
- 2. Fed’s Vice-Chairman in charge of crisis management Roger Ferguson unexpectedly resigned one week after the publication of our February Alert, despite the fact that he still had eight years to serv For LEAP/E2020, it is not an act of divination to conclude that the surprise-
resignation of the Fed’s Vice-Chairman a few weeks after the Bernanke took over a Chairman is a negative. On the one hand, Roger Ferguson won high marks for his success in handling the September 11, 2001 crisis while Alan Greenspan was in Europe. On the other, it was common knowledge that he opposed the new Chairman’s inflation targets. Whatever his motives may have been, his departure means that the Fed has lost at the same time its principal crisis manager and Alan Greenspan, the man who incarnated market confidence, at the same time…
Read more in the GEAB No 3 / 16.03.2006
