Editor's note
“FASTEN YOUR SEATBELTS; IT’S GOING TO BE A BUMPY NIGHT!”
Those who, like me, have a strong penchant for black and white movie classics will recognise in this title Bette Davis’ famous line from the 1950s gem All About Eve. The sentence was actually spoken at a birthday party about to turn sour. Sound familiar?
In the case of the global economy – before the shocking fall of the almighty US investment banks and the world’s biggest insurer – the party was merry for years, though the “danger” signs were there all along. Under Alan Greenspan’s reign, the US Federal Reserve injected millions of dollars into the economy. Money became cheap and banks started lending it to people with dubious or non-existent accountability. Consuming and borrowing (we’re also talking about houses here) reached levels never before seen, and all with amazingly low inflation. Bankers and investors blindly believed, or wanted to believe, that new pages were being written in the economy manuals.
What’s more, the whole world was encouraging this American dolce vita by buying all manner of banking products in US dollars. But the moment property values began to fall to half, borrowers dropped their mortgages and left the properties – effectively nothing more than
worthless, hot potatoes – in the hands of the banks. That’s how the sub-prime crisis started, sending out reverberating waves like the Lehman Brothers collapse. And the lowest point of this entire nightmare still remains to be seen.
Establishing parallels with the crash of 1929 is inevitable, but that is only valid to a certain extent. The globalised world of 2008 bears no resemblance to the disconnected and overwhelmingly poor world of the thirties. Still, history is being repeated in one sense. Everyone is turning to the national governments and central banks, looking for help. The US and several European governments have already acted to secure the maintenance of some former powerhouses through, for instance, rushed nationalisations. And markets worldwide are literally praying for the US congress to stop its usual bickering over domestic politics and allow the release of a US$700 billion bailout, which Wall Street desperately needs to boost confidence in the markets.
Is this 2008 “New Deal” enough to avoid another Great Depression? Nobody knows. Surely George W. Bush doesn’t want to go down in history with his name associated not only with the Iraqi debacle, but also with one of world’s worst economic crises. Neither does Obama or McCain for the same reason.
But there’s a brand new element that might be decisive in the world’s currently delicate balance. During the days of frenzied consumption, many governments amassed huge amounts of
money by buying, for instance, US treasury funds like China did. In fact Asian governments have combined treasuries worth an estimated US$ four trillion, and half of that belongs to China. In its Olympic year, wouldn’t it be Beijing’s consummate glory to release millions of dollars to the world and thus avoid global chaos? That would legitimate the country’s aspirations to be a world power at the same level as the United States.
One last word about Macau. The zero-growth gambling revenues for September have announced that the slow-down times are coming. The markets’ instability and the ups and downs in the Mainland visa policy will certainly make the rest of 2008, and especially 2009, a challenging year, and that's being optimistic. That means that the next chief executive will surely inherit harder times, even though he can rely on MOP 70 billion in reserves, courtesy of Edmund Ho. In this issue, we analyze Ho’s performance through two mandates and at the same time pose to our readers the million dollar question of who the next chief executive should be. In these trying times, both globally and locally, we hope to launch a debate that can help Macau people discuss what’s at stake and what the priorities of the next government should be. Please go to:
http://www.macaucloser.com
and have your say! Discussion is always enlightening, even with your seatbelts fastened…