From Volume 7, Issue 13 of EIR Online, Published Mar. 25, 2008

Global Economic News

London Investment Bankers Confess Failure

March 16 (EIRNS)—The investment bankers of the City of London are demanding a rescue from the Bank of England and the British government, in what is effectively an admission that their scheme to ride out the current crisis has failed. "The message from the City to the Bank of England and the Chancellor is that this is not enough. This crisis is now on a different level and there needs to be an appropriate response," the London Telegraph today quoted a senior City executive as saying.

Beijing 'Deeply Worried' About World Economic Crisis

March 18 (EIRNS)—Chinese Premier Wen Jiabao said today that he is "deeply worried" about the world economy, vowing to take flexible and prompt measures as changes develop. "I, myself, watch very closely the development in the world economy and the U.S. economy, and I'm deeply worried," Wen told a press conference at the conclusion of the first session of the National People's Congress in Beijing, according to Xinhua news service. "China's economy is already tied to the globalized economy. All kinds of changes and fluctuations in the international economy will inevitably be reflected on China's own economy," he noted.

The Chinese government signalled last November its recognition that the disintegration of the international financial system is a threat to China which must be faced. On Nov. 24, 2007, the official Chinese government press—Xinhua, People's Daily, and China Daily—published a Xinhua wire reporting that "renowned U.S. economist" and "famous political activist" Lyndon LaRouche had called for the United States and China to "join hands to reform world financial system."

Wen expressed particular concern over the depreciation of the U.S. dollar: "What concerns me now, is that the U.S. dollar is depreciating continuously, when the U.S. dollar will reach the bottom in this depreciation process, what kind of monetary policy the U.S. government will adopt and where the U.S. economy is heading."

In an ironic juxtaposition to the U.S. Fed's inflationary interest rate cuts, the Bank of China today raised the level of required bank reserves against deposits from 15 to 15.5%. This action confirms Wen's assertion that China will vigorously fight inflationary pressures.

Financial Oligarchs Push 'Swedish Model' of Bank Bailouts

March 19 (EIRNS)—Trans-Atlantic financial circles are promoting a poisonous, hyperinflationary reaction to the financial crash which they hope to make more palatable by putting the label "made in Sweden" on it. London's Financial Times is chief among those promoting scams similar to what was done in Sweden, in 1992.

At that time, the Swedish banking system collapsed after many years of real estate bubble-building and related financial scams. Under pressure from the financial oligarchy, the government assumed the banks' losses, thus bailing out the banks. The latter walked away scot-free, with their balance sheets in the black.

But the nation lost 80,000 productive companies and 300,000 of 1 million industrial employees lost their jobs, in a nation of only 8 million inhabitants. Sweden lost a remarkable 5% of its GDP at that time, a disaster from which it has yet to recover. The financial oligarchy placed a huge burden on society, in the form of a state-owned company called Securum, which assumed all non-performing loans and real estate credits, removing them from the balance sheets of the banks.

In its March 17 editorial, London's Financial Times wrote that "Central Banks and governments" can prevent financial problems, if they are willing to pay the price, by taking some or all of the problem assets onto the public balance sheet. That could be done through outright purchases of asset-backed bonds, cheap loans to the banking system, or government equity injections into banks. The US Federal Reserve has already begun to do this with its special lending facilities and rescue of Bear Stearns."

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