Business comment: Sub-prime crisis is the edge of a financial hurricane - Bernard Connolly
It is hard to overstate the seriousness of the global financial crisis. Yet the world's central monetary authorities - the central banks - have been culpably slow to recognize how dangerous things have become.In the US, the Fed is belatedly recognizing that what is now happening is not a "healthy correction" of the previous under-pricing of risk but a virulent infection running rapidly through the financial system, threatening to inflict severe structural damage on the real economy. Its decision announced last Friday to cut the Discount Rate, the rate at which financial institutions can borrow directly from the Federal Reserve Banks, was a step in the right direction. But it will not be anything like enough.
In contrast, the EU quite deliberately created the most dangerous credit bubble of all: EMU. And, whereas the mission of the Fed is to avoid a financial crisis, the mission of the ECB is to provoke one. The purpose of the crisis will be, as Prodi, then Commission president, said in 2002, to allow the EU to take more power for itself.
Note EU-Digest:"The above report by Mr. Connolly must be earmarked as the usual British Conservative rhetoric against the EU. Countries in Europe which have chosen to follow the US economic model - "buy now and pay later" (including Britain), will pay the price for this folly which has become a pure Fata Morgana. Unfortunately many other nations will also be dragged down by the sheer weight of this world-wide economic crises caused by poor judgement and greed."
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