In the immediate run, individual governments have largely done what is best for their own economies rather than the global system. In Europe, the Irish Republic, Greece, Spain, Germany, and Britain, have taken unilateral action. Their conduct shatters what was left of the idea of unity in the EU, especially among members of the euro currency zone. In the longer run, the era of deregulation of the kind we have seen in recent years is over. Protectionism in trade has migrated to the world of finance. How far the latest measures will succeed remains to be seen.
What we see is the result of a catastrophic loss of trust in the West. It goes well beyond economics and finance. It is the sincerity of political leaders of the West that is at stake. If those in power in Washington, London and elsewhere cannot be trusted on the critical matters of war and peace, law and justice and treatment of different sections of their own populations, their ability in other areas is bound to be questioned. The leaders of America and its allies have simply become captivated by a doctrine that leaves their economies at home, to be run by the large private institutions that they befriend, while they themselves go and fight wars abroad.
Today, America's wars are financed by money borrowed from China and the oil-rich Gulf states which are awash with petrodollars... And countries like China, Russia and Saudi Arabia, which have accumulated huge reserves in U.S. dollars, don't trust the West. The resentment in the Arab world against the treatment of Muslims by the West is strong. And the government of Iceland criticizes its 'friends' for not doing enough to help it and looks towards Russia to bail it out.
The West is simply broke – morally, politically and economically. [More]