Friday, September 26, 2008

Friday roundup

Just a few themes to finish the week with. James Joyner over at New Atlanticistlooks at European reactions to the U.S. financial crisis and sees a broadly more supportive picture than what I noted yesterday.

WIth Congress now focused on the financial bailout, I wonder if this basically punts what's left on Congress' foreign policy plate (trade deals, U.S.-India nuclear deal) to the next administration.

Finally, a question of the week for TWR readers: do other countries look for leadership to the U.S. if they feel America conducts itself in alignment with its moral and cultural values--or had countries in the past accepted U.S. leadership because it was better than the alternatives? A question based on what sort of effect closing Guantanamo Bay might or might not have--especially if the U.S. closes the camp but its financial crisis negatively impacts the global economy.

Dear Mr Gvosdev

This is not related to this post, but I was wondering if you could give us your oppinion on the Fukuyama change of heart and whether you think that the Neocon trend is beggining to recede or not...
Here is a good place to look:
In The Maltese Falcon, Sam Spade tells Brigid O'Shaughnessy: 'I don't care what tricks you're up to, what your secrets are, but I've got to have something to show that you know you what you're doing.'

This is I think rather how many people throughout the world feel about the U.S. today.
The estimated global "GDP" is around 43 trillion dollars a year. The estimated financial instruments outstanding (auto-loans, house loans, mortgages, derivatives, commercial loans, credit-card loans, insurance policies, etc.) world-wide is estimated to be around 740 trillion dollars.

Commercial banks usually carry reserves of 10% of their loan portfolio in US. We may extend this to the global GDP vs. global “Debt” and suggest that a prudent size for the global financial assets must be set around 400 trillion.

It then follows that there is almost 340 trillion dollars of financial instruments out there that cannot be prudently based on the global GDP size. This extra amount, equivalent to more than 8 years of global output , must be liquidated – the financial sector must be downsized by this amount; at a minimum.

I have neither seen an acknowledgment of this issue nor a remedy from any government anywhere in the world.
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