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Reply #25: The controversy surrounding this takeover [View All]

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fedsron2us Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Feb-25-06 08:24 AM
Response to Reply #24
25. The controversy surrounding this takeover
Edited on Sat Feb-25-06 09:09 AM by fedsron2us
has ramifications way beyond the shipping industry. What we are seeing are the first signs of serious restiveness about globalised capital markets from politicians and media pundits. These doubts are being expressed not just by the usual suspects on the left but even Republican US senators and conservative journalists in the pages of papers such as the Daily Mail. A not dissimilar storm has been brewing in Spain about the proposed bid by German energy giant EON for the Spanish company Endesa

One of the key issues appears to be that the bidders in the proposed takeovers are companies that operate in environments where they can not be subject to similar bids themselves. This concept of 'globalism for you and protectionism for me' is a critical flaw in the current world economy and is an issue that is going to cause major problems in the near future. It has its counterpart in the attempt by various nations to rig the value of their currencies in support of a mercantilist trading policies. This has led to the world's trading and financial systems getting so seriously out of kilter that there is a good chance that there is going to be a major economic crash. If you want to ponder how the current system might fall apart then you could do worse than read the following article on the carry trade

The type of instability that this activity is capable of generating was shown this week by the turmoil surrounding the Icelandic krona which at one stage caused the currency to devalue by more than 9% and threatened to spill over onto other currencies and markets.

The carry trade is the single biggest reason why the UK and the USA have been able to support the amazing inflation in the price of assets such as houses when their domestic savings rates have been so pathetically low. Unfortunately, when this flow of cash is cut off then the British, the American and ultimately the world economy are going to collapse very fast and very hard. When millions are on the dole then you can be sure that there will be plenty of people screaming for protectionism and no shortage of politicians willing to answer their call.

PS - I would not claim to be an expert on the shipping industry but I do know enough about financial markets to be aware of the existence of the Baltic Dry Index and its significance as indicator of the general state of the world's economy. It is one measure I shall be watching keenly over the next 12 months.
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