The situation is bad but it won't last forever.
We will "recover" but in retrospect America is now the GM of the world. We need a bailout and because as an economy "too big to fail" we'll surely get one.
It's not even well under way, but then this New Great
Depression Recession is behind us whom should we thank for our own bailout?
Here's a clue from RGE Monitor's Newsletter.
Several of Emerging Europe’s fast-growing economies have already turned to the IMF and EU for financial assistance. Most of those nations are suffering from sharply slowing economic growth, tough external financing conditions, elevated risk aversion and tense liquidity situation. In recent months, the IMF has committed roughly $48 billion to a variety of battered emerging economies, including Belarus, Latvia, Pakistan, Iceland, Ukraine, Hungary and Serbia. EU leaders called for IMF resources to be doubled to $500 billion to help head off new problems in countries already hit hard by the global economic and financial crisis. The U.S. has called for tripling the IMF’s lending capacity but getting permission for its own contribution (possibly an additional $100 billion) may face a tough congressional battle. While some analysts believe the EU does not have sufficient resources to save Eastern European countries without the IMF help, the fund could have as much as $443 billion available when the recent loan from Japan is taken into account, comparable to street estimates of Eastern Europe’s needs to cover loans and prop up the credit system. But will the channeling of funds reduce the vulnerability of those emerging European nations?
Asian countries like China, Japan, South Korea, India, Taiwan, Singapore and Hong Kong who hold more than $4 trillion in foreign exchange reserves - much of it in U.S. dollars are in a much better position. Asia's surplus position could be the ultimate source of capital to bail out the financial system, say by providing funds to the IMF to avoid further export contraction. Japan has already provided capital and China is reportedly considering a $40 billion contribution. However, China and other emerging economies would likely demand governance reforms, including rebalancing the institution’s voting power, likely at the expense of some European countries. In fact China comes to the G20 table with a set of suggestions about international financial reforms – most significantly, the central bank governor’s recent calls that the Special Drawing Right (SDR) might overtime supplant the US dollar as a reserve currency to avoid the instabilities of the current system. Elevating the SDR several key preconditions though including increasing flexibility of the RMB. China has been extending swap lines to emerging and frontier economies including Indonesia, Belarus and most recently Argentina, perhaps providing an alternative or complement to IMF funding for such economies.
In the same manner that GM is being asked to swallow some bitter medicine, so it the US.
When the dust settles we will be blessed to remain fist among equals. If we do remain, you know, equal.
The US economy is counting on an Asian safety net.