A major shift in world financial power centers is on the horizon. America is on the decline, while Asia and Europe are on the rise.
by Paul Kieffer
Just five years ago, it would have been hard to imagine an official representative of the German government making such statements in a speech outlining his government's position in Germany's parliament, the Bundestag. Yet at the end of September German Finance Minister Peer Steinbrück bluntly stated his view of the world financial crisis.
For Steinbrück one thing is absolutely clear: "The United States is the place of origin and the focal point of the crisis." Although the long-term effects of the crisis are as yet undetermined, Germany's finance minister prophesied that America "will lose its status as [the] superpower of the world's financial systems."
It doesn't take a lot of insight to identify America as the cause of the turbulence in the world's financial markets. The third quarter of 2008—especially the month of September—will go down as one of the most noteworthy chapters in the history of the modern financial system. In less than 30 days the world witnessed several alarming developments in the United States:
• The U.S. Department of the Treasury nationalized mortgage lenders Fannie Mae and Freddie Mac.
• The investment bank Lehman Brothers declared bankruptcy, making it the largest insolvency in American history with a $600 billion loss. Several German institutions had holdings in Lehman Brothers, including the Postbank, various national health insurance carriers and even the German national social security system.
• The investment banks Goldman Sachs and Morgan Stanley applied to operate as commercial banks to gain access to the FDIC for securing investor deposits. In so doing, both banks voluntarily accepted regulation by the U.S. Federal Reserve Bank.
