Foreign Government Reassurances - “We’ll be Alright; It’s an American Problem”

The international finger of blame is pointed at America as the under-regulated “free market” economy with loopholes drafted and designed by the special interests that benefited from the massive over-borrowing, fully sanctioned by the government. “It can’t happen here,” cry the nations of the world with their figures outstretched. Because the U.S. has been viewed as arrogant – trying to win a civil war in Iraq where it is not even supporting either faction (how do you win a war when you’re not a party?), telling the world that “you’re either for us or against us,” and in international opinion, an unbridled cowboy doing whatever it wants as a self-appointed global policemen (incurring massive military bills paid for with deep and unprecedented borrowings in the international market) – this is sadly being taking in as the payback for American hubris, something we just plain deserved.

But the international impact is just settling in. The European Union, which suffers from a lack of general EU oversight on financial institutions (still, for the most part, a local national matter), is beginning to see the ripples from our meltdown tsunami their way across the ocean. Many European banks drank at the toxic glass of over-leveraged American securities, and are shuddering near collapse as a result. Germany just issued an edict guaranteeing the safety of their bank deposits, and has moved to take over more than one financial institution. England is forcing sales of financial institutions and moving shaky banks to stronger players. Luxembourg , Belgium , Ireland , Sweden are all implementing ad hoc or overall “bailout” policies of their own.

Across the world, regulators are taking one more look at their “it can’t happen here” mentality and finding banking and financial institution anomalies within their own sacred cows. Further, as U.S. consumer demand drops like stone in a flurry of survival instincts, as small businesses shut their doors or postpone deliveries, the manufacturing economies of the world are gasping at the magnitude of the impact this reality is having or clearly will have on their financial viability. Financial capital Dubai is watching real estate values plummet and deal flow subside as oil prices have fallen mightily from their pinnacle a few months ago. The Singapore stock market plunged on Monday trading (along with its Asian brethren), a trend that carried over to Wall Street this morning.

While the U.S. market remains the shakiest, because the majority of toxic securities were born and consumed locally and the underlying consumer-homeowner market is hitting extreme negative growth, the harsh reality is that this is a global problem that is going to require global solutions. “Smug” is rapidly being replaced with “Oh my, it is happening here!”

All eyes are now on how America implements her bailout, and many overseas analysts know that if the Department of the Treasury focuses first on the big financial players, postponing the micro solutions until later – leaving bleeding small cash-strapped businesses (employers!) to writhe on the floor of the economic emergency room – many in economic death throes (since most working Americans are in small businesses), to allow the acceleration of real estate value-killing foreclosures to continue unabated without a moratorium, the tipping point taking us to a super-recession or even a depression is still out there.

If the soaring U.S. unemployment rates (which mask under-employment and those who have given up; they’re probably vastly higher) aren’t clear enough, then our leaders need a massive voter campaign to sound the alarm. The Treasury can deal with both issues at the same time – what it cannot do without dire consequences is take care of the big boys first and believe that the solution on Main Street will trickle down later. That option is no longer on the table, if it ever were.

I’m Peter Dekom, and I approve this message.