Circling The Wagons

From trade expansion and the universality of credit markets, to sudden reservations. Clearly, global financial trust and interaction is being subdued and singled out as a failed instrument of international economic advancement. Trust betrayed by the world's largest and leading economy to adequately govern itself, preventing all-too-human greed from corrupting and destroying the process. Markets, it was held, would govern themselves adequately, out of self-interest.

What market, after all, would seek to destroy itself? Well in theory, none. But when the cat's busy elsewhere, or just too fat and lazy to check in on the mice, out they come to play havoc with household goods and everything goes haywire. The intricate, interwoven and inexplicable process by which worthless paper was bundled in with more liquid assets to widely distribute the good and the questionable, cannot have been done in good faith or bad. It was done in deliberate ignorance.

It was accepted because even the acknowledged experts couldn't unravel all the ins-and-outs, couldn't make sense of all those hidden details. So everyone just shrugged and got on with it. Things would straighten themselves out. And so they did, if a monumental financial collapse can be identified as such. It's part of the process of the market eventually righting itself. Meanwhile, there's a whole lot of economic pain and little gain to be seen in the near future.

Out come the national protectionist ventures to try to halt the deterioration at hitherto open financial borders. Trade, import and export have dwindled to a squeaking pipe of painful contraction. Manufacturing is stuttering and businesses are declaring bankruptcy, laying off workers, the result of which is consumerism at a standstill. A deadly cycle, re-visited. It's a mean world, suddenly, and people, desperate for work and assurances, are demanding answers and rioting.

Normally fiscally conservative governments are suddenly eager to loosen treasury funds to encourage their skittish markets and shore up public infrastructure initiatives to try to put people back to work. The media is aiding considerably by publishing hysterical prognostications of even worse to come, panicking consumers into holding on tight to their pocketbooks, and mercantile consumerism is stagnating, closing down retailers and demoralizing everyone.

The International Monetary Fund is throwing cautionary advice to the winds, and calling on the world economy to pledge two percent of world GDP to "prevent global depression". "If we are not able to do that, then social unrest may happen in many countries, including advanced economies. We are facing an unprecedented decline in output. All around the planet, people have reacted with feelings going from surprise to anger, and from anger to fear", warns Dominique Strauss-Kahn.

OPEC is trying to adjust output to plummeting prices per barrel of oil which has lost its former princely return of $140 to oil-producing countries, to a painful current price of $40; absolutely unheard of. It desperately wants to stabilize oil prices. It instituted its deepest-ever supply cut in the hopes it would stem the oil-price slide. Their production cut has had no effect.

Russia, for her part, has decided not to cut back on oil and gas production. Its newly-realized lower revenues have come as a painfully unexpected surprise to a country that was so recently revelling in its new-found wealth. Moscow is getting ugly again with Ukraine, threatening to cut gas supplies and worrying Europe no end with the prospect of gas shortages reminiscent of 2006.

Russia has imposed import tariffs on cars, farm machinery and poultry. In support of domestic producers. India and Vietnam have done likewise. Even the United States, which should know better, and which is the identified source of the anguished loss of economic stability, is beginning to pull its borders tighter, slapping on new duties. It's beginning to look as though the U.S. will resort to tariffs, despite free trade deals, having the potential to result in a spiral of retaliation from its trade partners.

China's export strategy has hit a brick wall; exports in free-fall, with toy, textile, footwear and furniture plants closing by the day and 40-million Chinese workers losing employment, leading to a feared "mass scale social turmoil". In a desperate move for advantage in the plunging world marketplace, China has embarked on a strategy of devaluation to ensure its products remain attractive for export, earning the wrath of other countries.

Suddenly, the openness and co-operation between countries signing on to free trade deals and encouraging emerging markets to grow with the help of patronizingly generous IMF loans, has descended into a free-for-all of national advantage in a desperate attempt to shore up critical losses.

Nothing like an economic decline, much less a financial disaster, to persuade countries to withdraw, turtle-like, into their little protective shells.