Insight: West in political crisis has echoes of 1930s

(More Confirmation That Our Present Leaders Have Failed The American
People)

By Stella Dawson

http://news.yahoo.com/insight-west-political-crisis-echoes-1930s-1304067
33.html

"When the United States, Europe and China go into a crisis of this sort,
it can reasonably be said that the center of gravity of the world's
economy and most of its military power is in crisis. It is not a trivial
moment," Friedman wrote in "Dominoes of Doom" on the website
EconomyWatch.com.

Heather Conley, a former U.S. Under Secretary of State for European
Affairs and now a senior fellow at the Center for Strategic and
International Studies, said this near political paralysis seen in the
United States and Europe is common when governments are at an inflection
point.

"Without decisive direction and leadership, we march in place or attempt
to muddle through, uncertain of which path to take. The West is at such
a moment," she said.

"The best that can be hoped for in 2012 is a muddling through, where
economic growth in the United States averages around 2 percent compared
with zero in the euro zone, analysts said. World growth, buoyed by
emerging markets, looks set to average around 3 percent."

Martin Sass, founder of the New York based hedge fund M.D. Sass with
$7.5 billion under management, is among those pinning his hopes on the
elections breaking the stalemate. "I never expected the level of
dysfunction in the U.S. and European lawmaking ... and I never saw
fundamentals count for so little in the stock market. Politics and
contagion were the drivers of this underperforming market, not balance
sheets and earnings."

"Two narratives have emerged of what went wrong. The left casts the
banker as the prime villain, unpunished by the political elite who
allowed CEOs to violate all the principles of fiduciary and moral
responsibility in pursuit of personal gain, which fuels the perception
of a political system in collusion with a criminal financial elite it is
unwilling to punish."

The right-wing narrative casts big government as the villain for
exploiting the crisis to expand its regulatory powers that intrude on
free markets, and to spend money on huge bailouts and social welfare
programs that have only exploded the budget deficit.

In both narratives, the victim is the average citizen who is left paying
a gigantic bill - through high unemployment, higher taxes and lost
economic opportunity. Either way, the compact between political
governance and economic life has broken."

Although Western democracy has demonstrated the flexibility to reform
when facing severe challenges, the shadow of the 1930s looms large. This
uncertainty over whether strong political leadership can emerge in 2012
is haunting markets.

John Browne, senior economic consultant to Euro Pacific Capital, is
among the pessimists. He told clients in his year end note that American
and European Union politicians have shown utter unwillingness to take
tough decisions they know should be enacted to avoid looming global
economic disaster.

"With an estimated $6 trillion plus solvency shortfall of the euro zone
banks, and $16 trillion in U.S. public debt, it will take leadership of
far greater caliber to avert a disaster. Such leadership is nowhere in
sight," he said.