In a sytem that grew massive spending power on credit of all forms , monetary policy has hit the dead end of a failed banking system in the west. Only progressive waves of fiscal (spending) stimulus will support basic consumption needs until a new cycle of confidence, credit and risk taking can develop. As TED shows, it cannot happen overnight. The BRIC countries are not waiting for the west to develop the political concensus needed to get the process into first gear. Obama already has opted for a series of short fiscal fixes, signaling the broader processes for mega measures are at least three months away. Major damage will spiral through the US real economy during this funk. Nobody in the US expects otherwise. Thank God the helicopter fleet is ready to go on repeated missions.
Sadly as well, the US at G20 has stymied the re-regulatory process by rejecting any process that does not take place under the existing Wall St./Washington regulatory culture. That culture is based on control rather than ethics, so do not expect many countries other than Canada to jump into line. Pressing for the World Bank (yes, Wolfowitz !) to lead reform is a little like allowing only ex-bankrupts to be Fed governors. It will simply not result in an ethics based system and will not gain world concensus. It will be a long, ugly and ultimately ineffective process, in which derivatives , unregulated short selling , and lack of transparency will be just as much a part as they are today, but in a shrunken and less leveraged system.
Meanwhile, BRIC will develop its own trading and settlement systems and continue to grow steadily. Since tractors produced in Russia or China use just as much steel as those made in the US, world class resources will remain in high demand. NOT and its shareholders simply need a survivalist mentality in the short term. Those who cannot afford a few more shares at the (if as and when) next placement price will suffer some dilution, but will be significantly rewarded long term.
