Demonstrators demanding a halt to foreclosures in Michigan surround the lawn at the Lansing State Capital Building on Sept. 17, 2008. The rally called for the passage of SB 1306 immediately. (Photo: Alan Pollock).
Originally uploaded by Pan-African News Wire File Photos
Political Editor Munyaradzi Huni
Zimbabwe Sunday Mail
ON September 24 2008, US President Mr George W. Bush told worried Americans in his "Address to the Nation" that "this is an extraordinary period for America’s economy". He went on to deliver a speech that clearly showed that America is fast losing its so-called "superpower status in the world financial system".
Said Mr Bush: "I’m a strong believer in free enterprise. So my natural instinct is to oppose government intervention. I believe companies that make bad decisions should be allowed to go out of business. Under normal circumstances, I would have followed this course.
"But these are not normal circumstances. The market is not functioning properly. There’s been a widespread loss of confidence. And major sectors of America’s financial systems are at risk of shutting down."
Well, well, welcome to the world of reality, Mr Bush! Indeed, when markets are not functioning properly, governments should intervene.
And so when the Governor of the Reserve Bank of Zimbabwe, Dr Gideon Gono, says, "extraordinary circumstances demand extraordinary interventions", that should be easy to understand because the markets in Zimbabwe have not been operating properly since the imposition of sanctions.
As he pleaded for the US$700 billion rescue package, Mr Bush said "inaction is not an option" and here at home Dr Gono would say, "failure is not an option".
Mr Bush has unleashed the FBI to hunt all the executives who mismanaged their business leading to the financial crisis and the pursuits are reminiscent of the massive exodus by some of Zimbabwe’s top bankers over the period 2004 to 2005 following the crackdown by the RBZ. This followed serious financial indiscipline in the economy.
It is interesting that while the FBI is publicly hot on the trail for their errant financial managers, the same US system roundly condemned the RBZ for what they called stifling private business by persecuting what were seen as innocent self-made bankers.
Just as temporary relief, the US House of Representatives passed the US$700 billion financial sector rescue plan last Friday, but Mr Bush predicted "serious challenges" ahead.
Of course, Mr Bush is right in predicting tough times ahead because there is no one in the current US administration who was around and old enough to understand how the 1929-1933 Great Depression was tackled. The US has never faced such a serious financial crisis and indeed they must expect tough days ahead.
The IMF’s silence on the financial crisis in the US has been deafening but not surprising because the institution is also being run by "post-depression" economists who believe in textbook economics. What exactly is Mr John Robertson’s take on developments in the US financial markets? It would be interesting to know his views.
Towards the conclusion of his "Address to the Nation", Mr Bush conceded that: "Our 21st century global economy remains largely regulated by outdated 20th century laws." It’s good to see that Mr Bush is getting wiser.
He even suggested that laws governing his country’s Federal Reserve should be modernised. He said: "Earlier this year, Secretary Paulson proposed a blueprint that would modernise our financial regulations. For example, the Federal Reserve would be authorised to take a closer look at the operations of companies across the financial spectrum and ensure that their practices do not threaten overall financial stability. There are other good ideas, and members of Congress should consider them."
It looks like Mr Bush is copying the notes from Zimbabwe. Just last week, a panel appointed by Dr Gono to review the laws governing the RBZ chaired by retired High Court judge Justice George Smith recommended that laws governing the central bank should be reformed in line with global banking practices to give the bank more autonomy.
"There is need for a major review of the RBZ Act to bring it in line with contemporary central banking practices in other countries, especially aspects of its relationship with Government and its operational independence.
"The objectives of the monetary policy and the regulation and supervision of financial institutions are very different," said the panel.
The panel added that there was nothing sinister about the RBZ printing more money to finance national development projects as other countries in the world do the same.
"In some countries, the central bank engages in quasi-fiscal activities and prints money in order to finance development. Japan and Russia have used their central banks to spearhead developmental strategies," said the panel.
And yesterday, Dr Gono said: "As for money printing, let me reiterate for the umpteenth time that we will not let ministries collapse, we will not let hospitals collapse and we will not stop building dams until alternative financing schemes are available.
"Quasi-fiscal operations will be part and parcel of our lives. Statistics must save people and must not be used to kill people."
If only the IMF could listen and adjust to the 21st century realities.
On his return from New York, President Mugabe even said while the US and other Western countries criticised the RBZ for printing money, Washington was doing the same through the US$700 billion financial sector rescue plan.
He said Washington was having to resort to quasi-fiscal decisions to rescue its economy from the financial crisis, adding that the West calls something wrong when it is done by others, but when they do it themselves, they call it a rescue plan.
Maybe Dr Gono should spice up his economic recovery plan and call it a "rescue plan" so that America can understand his quasi-fiscal interventions.
Dr Gono is, however, not celebrating the developments in the US financial sector. He said: "No governor, no finance minister worth his salt delights at the financial turmoil happening in anyone’s backyard whether friend or foe. Governors today the world over are endangered species who can never do right for their economies."
Well, Mr Bush is fast sobering up and it’s unfortunate that he is doing so when his term of office is coming to an end. Americans will definitely remember him for spreading war, putting their financial sector into serious turmoil and only sobering up at the last minute when their country has lost its so-called "financial superpower status".
Last week, the German Finance Minister, Peer Steinbrueck, announced bad news for America when he said: "The world will never be as it was before the crisis . . . The US will lose its superpower status in the world financial system. The world financial system will become more multi-polar . . .
"It does not mean that the dollar will lose its function as a reserve currency, but it will be supplemented by the yen, the euro, which is already the second biggest reserve currency, and also the yuan . . . Over the next 10 years, we will be dealing with four big important currencies."
This is the legacy Mr Bush will leave for America.
At least the world now knows that the markets should never be left alone, otherwise they will wreak havoc on the economy. Americans have learnt this lesson with a US$700 billion bill.
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