In regard to the social and political dislocations, I do think we will likely see some of this occur. Heck, to a minor extent we already have seen some protesting and government failure (Latvia)so it is not a reach to project that when we get the actuality of rising unemployment that this unrest will follow. How ugly will it get? Let’s pray for some divine intervention.

In that vein, it is critically important that world leaders are sensitive in managing relationships. HRC is going to have her hands full. How messages are crafted and subtly or not so subtly delivered will play into this scenario.

While many banks and providers of capital around the world were far too lax in their underwriting ultimately the trail will lead back to Wall Street and the sub-prime/CDO structure.

We still have the army, but relatively little in the way of a manufacturing industrial complex. The army will be rendered useless without the production capacity. Look at the slow death of the British Empire once industrial capacity shifted form there to here around the turn of the 20th century.

I know very little about Germany. One anecdote though: a neighbor has a German boyfriend who gets a tremendous amount of vacation time each year, affording him very long visits here.

Another anecdote: a friend who lived in Germany for many years says they love to shop! I wonder how Americans and Germans match up as far as consumer spending goes?

Here are excerpts of a lengthy interview with the noted economist Niall Ferguson. The entire interview can be read at the link provided to The Globe and Mail where it appeared.

The Globe and Mail
‘There will be blood’
By Heather Scoffield
February 23, 2009 at 6:45 PM EST

…Policy makers and forecasters who see a recovery next year are probably lying to boost public confidence, he said. And the crisis will eventually provoke political conflict, albeit not on the scale of a world war, but violent all the same.

“There will be blood.”

…And much of today’s mess is the fault of central bankers who targeted consumer-price inflation but purposefully turned a blind eye to asset inflation.

[...]

….Partly because they can throw so much at it, and they can do it at a lower cost than anybody else, because the U.S. retains the safe-haven status, which makes the world so unfair. Here is the world’s biggest economy, which gave us subprime mortgages, rampant securitization, the collateralized debt obligation, Lehmann Brothers, Merrill Lynch. It is, in a sense, the fons et origo of this crisis. And yet, because it retains safe-haven status, in a global crisis, investors want to increase their exposure to the U.S. Hence, the dollar rally. Hence 10-year Treasuries down below 3 per cent yields. It’s almost paradoxical that an American crisis … reinforces the status of the United States as a safe haven.

…As you know, Chimerica – the fusion of China and America – is one of my big ideas. It’s really the key to how the global financial system works, and has been now for about a decade. At the end of The Ascent of Money, I speculate about whether or not that relationship will survive. If it breaks down, then all bets are off, for the U.S. and indeed for Asia. I think that’s really the key point. Both sides stand to lose from a breakdown of Chimerica, which is why both sides are affirming a commitment to it.”

… “There will be blood, in the sense that a crisis of this magnitude is bound to increase political as well as economic [conflict]. It is bound to destabilize some countries. It will cause civil wars to break out, that have been dormant. It will topple governments that were moderate and bring in governments that are extreme. These things are pretty predictable.

Read more and link to Globe and Mail here:

http://jessescrossroadscafe.blogspot.com/

Niall Ferguson, MA, D.Phil., is Laurence A. Tisch Professor of History at Harvard University and William Ziegler Professor of Business Administration at Harvard Business School. He is also a Senior Research Fellow at Jesus College, Oxford University, and a Senior Fellow at the Hoover Institution, Stanford University.

Wie Gehts. Is that pronounced like “we gets”–that syndrome that everyone seems to be evincing these days, from the banks to the voters, everyone lining up for their little piece of the pie [in the sky] that Obama’s handing out with such abandon.

We need to build a better mousetrap, not just offer the same old things.

You said here that you have a fairly good understanding of Germany’s economy. Right? That’s what you said if I understood you well. In that case can you please look into my question. Forget the mistake China is at the moment and that seem to consume us.

The question is as follows:

Considering the German experience when annexing East Germany into itself, what would be the effect for the U.S. of adopting Mexico as ‘republican partner’ (no political connotation) and working mano a mano to build that economy and to bring it to the level of the U.S.?

Question: What would that do for us?