Politics dont trouble; sell troops shape our world. So ranged the dominant ethos before 2008. Adam Tooze, the author of a landmark work, says it was always an illusion
‘I hear people say we have to stop and debate globalisation. You might as well debate whether autumn shall be guided by summertime .” That was Tony Blair, Britain’s prime minister, in October 2005.
Two years later, in the fall of 2007, Alan Greenspan, the former chairmen of the US Federal Reserve, was asked by a Swiss newspaper which candidate he was supporting in the forthcoming US presidential election. His response was striking. How he voted did not trouble, Greenspan proclaimed, because “[ we] are fortunate that, thanks to globalisation, policy decisions in the US have been largely replaced by global market armies. National security aside, it hardly makes any difference who will be the next chairperson. The nature is governed by sell armies .”
Theirs is a world we have lost. To understand it, you had to believe that global markets, like the seasons, were givens. You had to believe that sells had a logic by which they regulated and that the outcome of their regulate was, on the whole, benign. You had also to believe, as Greenspan’s exception indicated, that although national insurance abode political, it was separable from financials. Otherwise, if economics and geopolitics were caught, then presumably economics would be a matter for legislators, too.
In the 10 times since the financial crisis of 2008, all of those presuppositions have been divulged as inaccurate. The notion that the economy is a realm beyond politics or the gambling of international superpower has been exposed as a self-serving illusion.
Donald Trump is the most spectacular manifestation of that disenchantment and the one that matters most. He is an outright patriot, pushing against the trend of globalisation. He has little respect for markets unless they deliver outcomes he likes. He is not afraid to boss the heads or grumble about the Fed. And he proclaims that everything from imports of German vehicles to Chinese “borrowing” of US chip technology is a problem of national security.
Trump questions because the United States changes the entire system. Brexit scandalized Europe, but, as Theresa May’s government is finding to its cost, the UK’s effort to” take back control” does not mean that everyone else falls into line.
In trade and security, the UK shortage the heft, but it has determined our epoch of the processes of globalization and may still do so via one hugely substantial entity: the City of London. While Wall Street has America’s huge national economy as its hinterland, the City of London is outsized, preeminent in monies, interest rate derivatives and world bank Its present role and importance was already taking influence by the late 1950 s when it began to provide an offshore grocery for unregulated borrowing and lending.
Again, this was very much a political pick, determined via the growth of someting “ve called the” Eurodollar- a dollar held in Europe and hence, importantly, outside the jurisdiction of the Federal Reserve; a political selection enabled by the British authorities and digested by the Americans. Hence it was by way of London that the offshore dollar banking sectors was born, with intensely destabilising long-term results.
In fact, the consequences were nothing less than macrocosm historic. On 15 August 1971, Richard Nixon suspended the gold convertibility of the dollar.( By the terms of the Bretton Woods Agreement of 1944, which had determined post-war world-wide investments, monies were pegged to the price of gold .) For the first time since the fabrication of money in the ancient world-wide , no major currency was fixed to a metal base. Money was openly acknowledged as a political creation.
The result, in the short term, was an detonation of instability, inflation and gyrating exchange rates. It was a feast for investment bankers, both on Wall Street and in the City of London. Opec’s oil earnings added to the flow. To forestall taxes, the money was poured through offshore oasis, many of which were located in the former British empire, or exploited quasi-feudal entrepots such as Guernsey.
The eurodollar market was a ” work-around “. By the 1980 s, the push was on to achieve something more comprehensive: the wholesale the liberalization of uppercase crusades. Regulators in London and New York, egged on by bank stakes, were hastening to the bottom.
By the 1990 s, the City of London had ceased to be in any feel a British bank core. After Margaret Thatcher’s Big Bang, the small merchant banks of the City were broom up by Asian, American and European contestants. The City became, as Mervyn King quipped in 2012, the Wimbledon of their economies. The success of British contestants was rarely, if ever, the moment. But that sporting analogy, with its prompting of grandeur and decorum, is flattering. The City of the thunder times was more akin to the Premier League: reckles, cosmopolitan, sucking in punters from around the world and showered with astounding quantities of money from questionable sources.
As much as it was world-wide, neighbourhood challengers were still in video games. The old-fashioned City might have gone, but the large-scale British commercial banks had not given up. Like their European counterparts, Deutsche Bank and Paribas, like American high-pitched street banks, such as Bank of America or Citigroup, the British whales- Barclays, RBS, HBOS- wanted a slice of the world activity. It was the merger of the megabank with the financial market simulate- Premier League minced with Wimbledon- that formed the standards of the comprehensive meltdown of 2008.