Global Financial Instability: We Are One

I decided to tap into the world news tonight. I am not watching t.v. much but felt I should tune in. The global financial crisis mark II is on the minds of many.

The thoughts that come to mind is corruption, greed and self interest. These are the underpinnings of the global system. These undercurrents is what runs the system. I am going to interweave some different thoughts into this. I am listening to Eckhart Tolle, he is well known for the Power of Now and Stillness Speaks amongst other materials. What comes to mind is the structure is unstable. All material structures are unstable. So what is interesting is that we have created structures and called them stable. We created notions of economic growth and called this security. These of course are inventions humankind has invented in a industrial structure. In reality, the structure was never stable, it just appeared that way.

Another few words that I am noticing in a range of different places (synchronicity) are the words ‘coming together’. I have felt this in my work that as a society we must come together in alignment with the world we wish to create. Moreover, International Monetary Fund Chief Christine Lagarde indicated ‘acting together’. In truth we cannot be acting, we actually need to find cooperation. This is similar to team work without vested interests but for the greater good. This is the challenge of our times. It is interesting I noted with the Italian financial crisis all the traditional groups were in opposition in the Parliament, the italian radio journalist stated, they have to pass the bill. This bill is to pass austerity measures. Yet there will be groups taking traditional positions as that is what they know to do. This is the nature of the Parliamentary structure and notions of power over, groups seek to win over others, force negotiations and assert their positions. In conflict resolution we speak of win/win where the focus is on the problem rather than fighting certain people or working from self interest. So Parliamentary systems, in my feeling, tend to not function well in creating unity or indeed problem solving for the greater good, much energy goes into power politics. This can be seen in crises emerging which is why deadlocks occur. The energy is about minimising loss, not losing. There is not a process where all can work together so the situation ‘comes together’ for the greater good. Opposition undermines or polarises that rather than providing empowering contrasts where differences fuel creativity and assist in identifying workable solutions. This can be extrapolated to the world at large, in my view, where nation states work against other nation states as they are in competitive postures, they do not know how to work together as a global community. It is interesting to see the Chinese leadership hesitate as it may be concerned about being ‘burned’ (losing money on poor investments). According to the article below China has 3.2 trillion in reserves (US dollars). Moreover, there is international pressure for China to appreciate the Yuan. I recall this happening with the Yen in Japan during the Asian Tigers success. The significant appreciation of the Yuan ensures Chinese exports inflate in price as it costs more to exchange into Yuan to buy products and services which lowers demand. Hence, less US dollars flow to China. Thus enabling others to compete and gain profits to fund bring liquidity into home markets. The US dollar does not depreciate further. That would be my reading, although I am sure it is more complex than that.

I ponder whether China is hoping for financial collapse in the eurozone and US to take poll position as a superpower on the world stage. Even if China were to decide that strategy and develop their internal market to fuel activity, they are still connected to the world. If the world economically collapses, more conflicts will arise and this impacts of security and stability. In truth it is in all interests to work cooperatively rather than strategically for a new system where we all win. This of course would be difficult for a global economic paradigm that only knows competition. However, the future will be cooperation and that is the reason the world will go through these challenges as it is currently out of balance with the planet and is not sustainable. Thus if the Chinese leadership does take the above view, they still has to breathe the same air, drink clean water and feed populations. Climate change is the twin deficit scenario – financial/ecological, they are intimately linked. The real stability exists in the concepts ‘we are our brothers (and sisters) keeper’, ‘love thy neighbour as thy self’ and social harmony replacing economic growth as the focus. Harmony means balance and working together in peaceful ways in comm-unity. The Chinese know about peace, harmony and balance. This expresses itself in the healing arts of herbal medicines, acupuncture and peaceful techniques where they treat the whole body, rather than the parts. They see themselves linked to the whole. Those in China dedicated to balance understand wholeness. So China can find its wisdom in its own culture. However, politics is another matter where power and control become the illusion. China will discover it is a part of the whole and the days of empire are over. The world has natural limits, that is reality. The world is moving to a new paradigm. The only question is – can they see it?

So back to the world economic paradigm as it is currently framed. Note the fear and self interest. I’ll be interested to see if solutions can be found cooperatively. This is the real test.

http://economictimes.indiatimes.com/news/international-business/imf-chief-christine-lagarde-warns-world-economy-risks-downward-spiral/articleshow/10668604.cms

BEIJING: International Monetary Fund chief Christine Lagarde on Wednesday warned the world risked plunging into a “downward spiral” of financial instability and urged Asian economies to be on their guard.

Lagarde said Asia was not immune to problems currently sweeping the eurozone, as she began a two-day visit to China likely to focus on the deepening debt crisis in Europe.

“If we do not act together, the economy around the world runs the risk of a downward spiral of uncertainty, financial instability,” she said at the International Finance Forum in Beijing.

Lagarde has so far held talks with Chinese central bank governor Zhou Xiaochuan on the “global economic situation”, the People’s Bank of China said in a brief statement.

Foreign ministry spokesman Hong Lei said Lagarde would also meet with “state leaders” but did not specify who they would be.

Any discussions are expected to touch on China’s possible contribution to a bailout fund — the European Financial Stability Facility — established to provide support to the bloc’s struggling economies.

European leaders have called on China, which has the world’s largest foreign exchange reserves at $3.2 trillion, to invest in the fund.

The head of the fund, Klaus Regling, has travelled to Beijing for talks about a possible contribution, but China has so far made no firm commitment to provide financial assistance for the troubled eurozone.

Europe has been discussing with China and other investors how to structure a special purpose investment vehicle and is exploring the possibility of linking it to the IMF.

“We are all in it together and our fortune will rise or fall together,” said Lagarde, fresh from a visit to Russia where she warned Moscow against complacency, given the budget crises in eurozone states.

“Asia is not immune. Whether it is the trade channel or whether it is the financial sector which can operate as a crisis accelerator, Asia needs to be prepared.”

Lagarde added to pressure on Beijing for a faster appreciation in the yuan, saying that while China was on the “right path” in terms of boosting domestic demand, a stronger Chinese currency “in real effective terms” was needed.

The United States and Europe — major buyers of Chinese products — have accused Beijing of deliberately keeping its currency undervalued to give its exporters an unfair advantage. Beijing has rejected the charges.

At the G20 summit last week, China pledged to promote greater flexibility in the currency, but analysts do not expect to see a dramatic change in the value of the yuan given the importance of exports to the Chinese economy.

A move to help developed European countries out of the current crisis would be a hard sell for leaders of a country where millions of people still live in poverty, and inflation and housing costs are straining household budgets.

China has also been burned before on risky overseas investment. It bought stakes in investment bank Morgan Stanley and asset management firm Blackstone only to see values collapse in the 2008 global financial crisis.

The losses led to severe criticism of the investment choices made by the $400 billion sovereign wealth fund — China Investment Corp (CIC) — only a year after it was established in 2007.

At the weekend, a top official at the CIC accused Europe of “indolence”.

Jin Liqun, chairman of the board of supervisors of the fund, said in an interview with Al-Jazeera that Beijing would consider investing in Europe but any decision would be based on likely investment returns.

Lagarde is due to brief the press about her visit on Thursday, before leaving for Japan.