allAfrica.com: Namibia: Please Don't Tell Our Customers We Are Bankrupt (Page 1 of 1)

There is only one reason I can think of why the inter-bank credit markets do not want to become unstuck. Europe's banks have extremely talented people on their staff, and when the dominoes started falling in the US, I am sure they must have calculated their own exposure, more specifically that part of their balance sheets, which is exposed to sub-prime and come up with an astonishing answer: they are technically bankrupt and given their leverages, they realised there is nothing they could do about it.

Now they sit mum, not making a statement, not revealing the true state of their balance sheets, and sadly, hoping for the competition further down the block to slide before they do.

The inter-bank credit market is stuck because banks are hoarding cash - as every analyst points out - but it remains stuck because European banks are scared out of their wits to reveal to shareholders and depositors the true unsalvageable state of their balance sheets. And they know with leveraging of up to fifty times, they are going down. Rather then shut up, do nothing and pray a bank run does not start tomorrow morning. What other reason could there possibly be why Ireland, Germany and Greece jumped the EU gun and guaranteed deposits.

The First World and the Far East's banks were riding racehorses on steroids. Now they have been found out, no more drugging, and they do not know what to do about it. We on the Dark Continent, on the other hand, had to be satisfied with riding a donkey, or even walking on foot most of the time. We are so far behind in terms of our economies, the world's troubles are in many instances blowing over our heads, and I believe there are many millions of my fellow Africans who are blissfully unaware a major cataclysm is engulfing the world. We are so used to poverty and struggle that one or two upheavals, far from our land, do not really grab the man in the bush's attention.

I believe the USA has just entered the second phase of the same cycle Japan faced in 1990. This leads to a startling conclusion: If the world's second biggest economy did not manage to pull itself out of it 18 years later, what can be expected from the biggest? The same will happen to Europe where conditions will be exacerbated by an ageing population and much higher social security commitments for the next 50 years. Viewed broadly, I think the world is facing two decades of bleak prospects with growth that more or less tracks population growth.

It sounds very dark but unfortunately that is exactly what it is. The world's financial system is in a desperate situation. To overcome this hurdle we need an aggressive solution. For that I support the European central bank and the Federal Reserve's drastic measures but unless we address the underlying problem - debt - we are not solving anything long term.

Just as the events after World War I destroyed the German middle-class and laid the foundation for World War II, I believe current events in the USA have the potential to destroy or at least, greatly harm the American middle-class. But this time around the seeds for a third world war are not being sown, instead the seeds for a civil war in the United States are being planted everywhere. Already there are US communities who are preparing for a complete collapse of the dollar, and following that, a complete collapse of the US financial system. As yet, still on the lunatic fringe, I admit, but conditions are deteriorating at such a fast pace, and US household debt will not evaporate. If, in ten years from now, the average middle-class working man cannot afford a home for his family, then check again on my words of now. America will become destabilised politically the moment its financial base crumbles.

I sincerely hope my current view will not turn into reality. At this point there is no way that anybody can tell for sure and it may just be possible that the frantic stimulation may yet work, but I stand to be convinced. If I take a spread of views, as I see them daily on channels like Bloomberg and CNBC, I suspect there is an unnervingly large number of people who may reluctantly agree with me.

Afterthought

Will someone please tell the Zimbabwean Central Bureau of Statistics to stop throwing this ridiculous number around of an inflation rate in the hundreds of millions percent. It gives me less hope than ever for Zimbabwe if those paid to do the work do not realise an inflation rate of 632,000% per day, or 26333% per hour, or 2194% per minute is the biggest nonsense ever. There is not enough paper in the world or fast enough printing presses to produce that money supply, so why carry on with a statistical farce?

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