Today’s Rip Van Winkle would get a real shock4 min read . Updated: 27 Oct 2008, 10:47 PM IST
Today’s Rip Van Winkle would get a real shock
Today’s Rip Van Winkle would get a real shock
Imagine what Rip Van Winkle might make of the world today.
You wouldn’t need to sleep 20 years, like the title character in Washington Irving’s 1819 short story, to wake up and be shocked by events. How about just one year?
Say you checked out of the world 12 months ago, maybe on an Indonesian beach, or at a Thai monastery or in the Malaysian rainforest. No phones, no newspapers, no television, no Internet—a total news vacuum. Think how disorienting current events like these 10 would be.
1. The subprime crisis isn’t containable. Like the canard about Asia decoupling from the US, the oft-argued point that mortgage-market troubles won’t spread and that economists like Nouriel Roubini are worrywarts has been roundly humiliated. Just as Asian markets are plunging, credit markets are being dragged lower and lower and lower.
2. Bear Stearns and Lehman are no more. Who might have thought a year ago that Wall Street titans Bear Stearns Cos. and Lehman Brothers Holdings Inc. would go kaput? Or that Goldman Sachs Group Inc. and Morgan Stanley would become bank holding companies, heralding the end of the investment banking model? Oliver Stone is even beginning a sequel to 1987’s Wall Street, a film released during an earlier stock market crash.
3. Japan is recession bound. Well, this shouldn’t be such a surprise. One of Japan’s biggest consistencies is disappointing bulls. Japan was growing stably a year ago. Now, with the Nikkei 225 stock average less than half what it was then, the yen at 13-year highs and Japan on its third prime minister in two years, recession risks abound and a Bank of Japan rate cut looks inevitable. The US, meanwhile, is indeed looking Japan-like. Next stop for the Federal Reserve: zero interest rates?
4. The International Monetary Fund (IMF) is back in business. A year ago, commentators argued IMF was no longer needed. Now that Iceland is tapped out and Ukraine, Pakistan, Hungary and Belarus may need financial assistance, IMF is plenty busy. South Korea, meanwhile, has been airlifted back to 1997. Its Kospi Index just had the worst week in at least two decades and the won is in virtual free-fall.
The world is red?
5. Socialism is in; capitalism is out. China used to be the most-watched socialist nation. Now it’s the US, which is nationalizing its economy with a speed that will soon have students asking: “Ronald Reagan who?" How far the stock of laissez faire capitalism is falling can be seen in how fast former Fed chairman Alan Greenspan went from maestro to villain. You’d think that after the Long-Term Capital Management debacle in 1998 even Greenspan would’ve wondered if unregulated derivatives markets were a good idea. Guess not.
6. Barack Obama? Anyone out of play for a year might be shocked to find that a black, 47-year-old junior US senator may soon be elected US president. Asia is keenly awaiting the 4 November contest in hopes the next president, whether Obama or senator John McCain, will act fast to stabilize the world’s biggest economy.
7. Thaksin Shinawatra is still dominating Thailand. So you thought the Thai prime minister had been removed in a 2006 coup? While technically true, his shadow still dominates Asia’s No. 8 economy. The guy running Thailand these days is Thaksin’s brother-in-law, Somchai Wongsawat. Somchai is so unpopular that street protesters, in addition to insults, are throwing shoes and plastic water bottles at him. One of these days, they’ll get around to changing the country’s name to Thaksinland.
Oil’s not well
8. Oil prices. The collapse of oil would be a real eye-opener after an out-of-touch year. Talk of $200 (Rs10,020) a barrel has ended and a panicky Organization of Petroleum Exporting Countries, or Opec, is cutting production to stabilize prices that fell below $64 on Friday. Well, at least the aggressive fuel surcharges imposed by airlines are still with us. What’s up with that?
9. Dow 36,000? More like 3,600. From just over 13,500 a year ago, the Dow Jones Industrial Average closed at 8,378 on Friday. If there’s any good news here it’s that President George W. Bush didn’t get his way privatizing Social Security. Otherwise, the US might need to build a whole lot of homeless shelters for the elderly.
10. The “poor" now have the power. Sovereign wealth funds certainly were in the news a year ago. Yet the extent to which cash rich developing nations are bailing out wealthy economies has been humbling. You have to wonder how much US treasury secretary Henry Paulson is going to love going hat-in-hand to China or Saudi Arabia for a handout.
OK, so this is a rude awakening, one Rip Van Winkle never could have fathomed. You might be tempted to escape from the world for another year—or to fulfil that dream of doing humanitarian work in, say, Cambodia, or teaching English to kids in Mozambique.
But hey, lighten up. Things can only get better. More to the point, they really, really need to.Bloomberg
Respond to this column at email@example.com