Geopolitical effects from the financial meltdown
I submit to blog readers the following data points for how the current crisis is affecting world politics. Some contradictory data, and one worrisome trend First, there’s this extraordinary story from the Financial Times’ Tom Braithwaite: Geir Haarde, Iceland’s prime minister, said on Tuesday that the country’s “friends” had not offered financial assistance to his ...
I submit to blog readers the following data points for how the current crisis is affecting world politics. Some contradictory data, and one worrisome trend First, there's this extraordinary story from the Financial Times' Tom Braithwaite: Geir Haarde, Iceland’s prime minister, said on Tuesday that the country’s “friends” had not offered financial assistance to his country, forcing it to seek a capital injection from Russia. Iceland earlier revealed that Russia had agreed to provide the country with a €4bn ($5.4 bn) loan as the crisis-hit country set about shoring up its foreign exchange reserves, although Russia’s deputy finance minister, Dmitry Pankin, later said no agreement had been reached. Iceland’s currency, the krona, rallied on the news wiping out losses made on Monday and earlier on Tuesday. “We have throughout this year asked many of our friends for swap agreements and for other forms of support in these extraordinary circumstances,” Mr Haarde said. “We have not received the kind of support that we were requesting from our friends. So in a situation like that one has to look for new friends.” Iceland’s central bank said its Russian counterpart had provided €4bn on a four-year deal, with interest set at 30-50 basis points over the London interbank offered rate. The move follows discussions with other countries in the past few days and emergency legislation passed in Iceland on Monday night that allows the nationalisation of banks.... Mr Haarde refused to say which countries had refused to offer help. He said the Nordic central banks were the only ones to come forward before Russia; they agreed a €1.5bn facility in the spring but the Icelandic government decided it needed more funds to shore up the currency. “In a situation like this it’s turning out that it’s every man for himself, every country for itself, everybody’s taking care of their best interest and that’s what we are doing,” the prime minister added (emphasis added). Russia has problems of its own right now -- as do other capital-rich economies -- so we'll see if this is part of a larger trend. Meanwhile, Brad Setser points us to this extraordinary post: The movements in the FX market are incredible. One friend just read me something which he has received from an fx trader which said that the only things that anyone desires to own are the US dollar, the Japanese Yen, gold, bottled water and bullets!!! Don't forget duct tape and shotguns. Now on the one hand, this last line suggests that, paradoxically, the U.S. still benefits from crisis times. That said, the thing that troubles me is the common thread in both data points -- the perception that there is zero global coordination going on during a moment of crisis for globalization as we know it. Developing....
I submit to blog readers the following data points for how the current crisis is affecting world politics. Some contradictory data, and one worrisome trend First, there’s this extraordinary story from the Financial Times’ Tom Braithwaite:
Geir Haarde, Iceland’s prime minister, said on Tuesday that the country’s “friends” had not offered financial assistance to his country, forcing it to seek a capital injection from Russia. Iceland earlier revealed that Russia had agreed to provide the country with a €4bn ($5.4 bn) loan as the crisis-hit country set about shoring up its foreign exchange reserves, although Russia’s deputy finance minister, Dmitry Pankin, later said no agreement had been reached. Iceland’s currency, the krona, rallied on the news wiping out losses made on Monday and earlier on Tuesday. “We have throughout this year asked many of our friends for swap agreements and for other forms of support in these extraordinary circumstances,” Mr Haarde said. “We have not received the kind of support that we were requesting from our friends. So in a situation like that one has to look for new friends.” Iceland’s central bank said its Russian counterpart had provided €4bn on a four-year deal, with interest set at 30-50 basis points over the London interbank offered rate. The move follows discussions with other countries in the past few days and emergency legislation passed in Iceland on Monday night that allows the nationalisation of banks…. Mr Haarde refused to say which countries had refused to offer help. He said the Nordic central banks were the only ones to come forward before Russia; they agreed a €1.5bn facility in the spring but the Icelandic government decided it needed more funds to shore up the currency. “In a situation like this it’s turning out that it’s every man for himself, every country for itself, everybody’s taking care of their best interest and that’s what we are doing,” the prime minister added (emphasis added).
Russia has problems of its own right now — as do other capital-rich economies — so we’ll see if this is part of a larger trend. Meanwhile, Brad Setser points us to this extraordinary post:
The movements in the FX market are incredible. One friend just read me something which he has received from an fx trader which said that the only things that anyone desires to own are the US dollar, the Japanese Yen, gold, bottled water and bullets!!!
Don’t forget duct tape and shotguns. Now on the one hand, this last line suggests that, paradoxically, the U.S. still benefits from crisis times. That said, the thing that troubles me is the common thread in both data points — the perception that there is zero global coordination going on during a moment of crisis for globalization as we know it. Developing….
Daniel W. Drezner is a professor of international politics at the Fletcher School of Law and Diplomacy at Tufts University and co-host of the Space the Nation podcast. Twitter: @dandrezner
More from Foreign Policy
Saudi-Iranian Détente Is a Wake-Up Call for America
The peace plan is a big deal—and it’s no accident that China brokered it.
The U.S.-Israel Relationship No Longer Makes Sense
If Israel and its supporters want the country to continue receiving U.S. largesse, they will need to come up with a new narrative.
Putin Is Trapped in the Sunk-Cost Fallacy of War
Moscow is grasping for meaning in a meaningless invasion.
How China’s Saudi-Iran Deal Can Serve U.S. Interests
And why there’s less to Beijing’s diplomatic breakthrough than meets the eye.
Sign up for Morning Brief
Foreign Policy’s flagship daily newsletter with what’s coming up around the world today. Delivered weekdays.
By submitting your email, you agree to the Privacy Policy and Terms of Use and to receive email correspondence from us. You may opt out at any time.
