Crisis calls for visionary leadership

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Lead Editorial

28 Sept 2022
Vol. 24 No. 39

As the world careens simultaneously into economic breakdown and world war, those who understand the genesis of the crisis and can envision the pathway out will be elevated into crucial leadership roles—whether they are public officials or ordinary citizens. The role of the Citizens Party, in pulling together an informal alliance of thinkers from all strata and every political persuasion, may be a critical factor in ensuring that plans are in place and solutions are ready.

The war danger is escalating by the day (p. 12), but the pathway for dialogue remains open if our leaders choose it. On the financial front, more nations are demanding an alternative financial architecture and steps towards its creation are unfolding rapidly.

This could not come a moment too soon and will form the life raft for collapsing developed nations to jump onto. Deutsche Bank has forecast a deep 3 per cent recession for Europe continuing through mid-2023. The Bank of England has pronounced the UK in a deep and lasting recession. The USA is close to measuring zero to negative growth for its third consecutive quarter.

The pound sterling has suffered the worst collapse since it was floated in 1971, following Prime Minister Liz Truss’s announcement of tax cuts for big earners and an end to post-2008 caps on bankers’ bonuses. Further financial deregulation was already under discussion, but Truss is set to supercharge it. In 2012 she co-authored a radical free market call for smaller government, lower taxes and a deregulation blitz, with collaborators including her new Chancellor of the Exchequer, Kwasi Kwarteng. Kwarteng moved quickly to reassure City of London banks that a “Big Bang” 2.0 financial reform package was his top priority. The Guardian reported that Truss may have “handed power over to the extreme neoliberal thinktanks”, pointing out her advisory staff are sourced from Mont Pelerin Society think tanks including the Institute of Economic Affairs, Centre for Policy Studies and Adam Smith Institute, which dictated disastrous financial deregulation to the world.

As if matters were not precarious enough, banks in the City of London are preparing for power outages this winter, discussing emergency plans to utilise offshore sites or work from home. Banks, comprising “critical national infrastructure” will be prioritised over households, many of which will freeze.

Add to this picture the ongoing market carnage, and numerous warnings from voices who foresaw previous crises. Economist Nouriel Roubini, a.k.a. “Dr Doom”, sees a “long and ugly” US recession ahead, including a 30-40 per cent collapse of the S&P 500 stock market index. Howard University economist William Spriggs also warns of recession, saying the US economy is like a four-engine aeroplane with only one engine that works—households—which most experts want to turn off with their rate hikes!

Writing in the AFR 26 September, financial journalist Karen Maley cites Bank of America strategist Michael Hartnett, who warns of a big bond price drop disrupting credit flows and compares the current share market to that of 1987. High-profile economist David Rosenberg also warned of a 1987-style crash “led by an aggressive Fed and surging bond yields”, only worse, as today’s crisis combines with new instabilities.

At the extreme end of the spectrum, desperate depositors in Beirut, Lebanon, have raided at least eight banks. A first lieutenant in the Lebanese Armed Forces opened fire inside his bank; depositors held bank tellers hostage, demanding their money which has been devalued and subject to withdrawal limits. In response all banks closed their doors for three days from 19 September, which may continue indefinitely. Some branches are now only accessible by appointment. Perhaps Australian banks hope to avoid such an outcome by ensuring there will soon be no branches left! A better safeguard is implementing a public post office bank as a stepping-stone to restoring full national banking capacities to rebuild the nation.

In this issue:

• Watch ‘The Aussie woman scaring the Western propaganda machine’
• CSIRO’s Bradfield Scheme assessment a neoliberal fail
• US agent ‘set the agenda’ for Morrison’s Cabinet of One
• Who made households the front line for global finance?
• What’s in China’s monetary tool kit?
• Wave of rate destruction set to continue
• Book Review: The American Trap
• Sixty years after Cuban Missile Crisis, on the brink again
• Western propaganda exposed!
• Cuban Missile Crisis: A lesson in diplomacy
• ALMANAC: Russian and American views of the strategic crisis

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