Fears dominate
Indicators of concern about risks to the Economy, such as depression and deflation, are nearly double the number about risks to the Environment, a reversal of last year’s counts.
The severity of warnings about risks to People is becoming increasingly alarming, with sources predicting “endgames” including “mass starvation” and the “end of civilisation”.
Given the evidence Open Intelligence has collected about economic and social dangers of peak energy risks, it is surprising to find that Risks cited under Energy, are less than a third of the number cited under People or the Environment.
The number of risks indicators under Digital Technology is low and is dominated by privacy and “information literacy” issues. Most recently, however, articles are emerging indicating growing risks associated with the energy and environmental costs of Digital Technology.
Six month count to May 2009
Economy (47) 41%
Environment (27) 23%
People (25) 21%
Energy (8) 6%
Digital Technology (5) 4%
Focus shifts to government
The greatest numbers of articles in the Open Intelligence collection warn of risks posed by the response of government Regulators to the economic crisis, three times the number of Clips about risks associated with Financial Markets.
Content analysis of last year’s Clips suggests that concern about Risks from the credit crisis moved during 2008 from Consumers to Financial Markets. Now the focus is increasingly on risks of the bailout and stimulus policies.
Six month count to May 2009
Regulators (27) 57%
Financial markets (9) 19%
Macro (7) 14%
Consumers (4) 8%
Regulators: Massive failure feared
Causes
Governments are portrayed as “normalising” behaviour in the financial which would have been illegal before the wave of market deregulation and privatisation which started with the policies of Ronald Reagan and Margaret Thatcher. The Bailout and Stimulus policies are seen as “rewarding criminal behaviour”, while catering to a “banking elite” at the expense of the public.
Policy failure is said to result from factors, such as “unrealistic forecasts” which ignore the “downward spiral” caused by the huge reversal in the public’s attitude towards consumption. Policy does not recognise that over indebted people who lack money do not want to borrow, while banks do not want to lend them, anyway, because they are unlikely to be able to pay it back
Government policy widely criticised for “neglect of the medium term” (not to mention the long term, Ed.) in what are seen as increasingly desperate and costly “fire fighting” measures. Regulators are characterised as acting with “depressing timidity”, “indecision” and “unwarranted optimism”, and “throwing good money after bad”. They are accused of confusing “insolvency” with “illiquidity”, while lacking an understanding of the scale and quality of the “toxic assets” held by the banks.
Effects
The results of Regulators bailout and stimulus policies are seen as slowing, but making more expensive more and more “foundering” rescues. These policies are described as “lemon socialism” in which taxpayers are made liable for the losses, while bankers profit from the gains. Savers are reported being penalised, at the same time as massively indebted taxpayers are reported loaning financial institutions, $7.4 trillion, when the debt to GDP ratio more than 350% of GDP.
In Japan, the bailout and stimulus policies of “state directed capitalism” are reported to have shown “no positive impact” after 15 years, only an enormous government “debt burden”.
Amid reports of the danger of government money “running dry” amid huge fiscal deficits, there are indications that bond markets are becoming reluctant to buy government debt in the face of the “floodgates” of government bonds. There are also warnings that the “windfall” of money being created by the world’s central banks and the IMF is liable to ignite “hyperinflation” with devastating consequences to the global financial system and effects widely seen as “worse than the Great Depression”.
Despite the Regulators rhetoric cautioning against “protectionism”, “competitive” bailouts and stimulus programs are seen as a new kind of new “beggar-thy-neighbor” policy, and “draining” developing economies of credit, and setting the stage for trade wars.
[...] 2009/06 RISKS: Focus shifts to government debt [...]