Answer to Haiti Crisis to Create Bigger Global Financial Woe?


 

How Will Citizens of the World Pay?

Crisis in Haiti Demands attention (Click Image for recent slideshow)

US Intervention: First off, just a note.  A few days ago I posted a piece that suggested it was time for US intervention in Haiti for the umpteenth time in the past 150 years.  I had someone suggest that I had rocks in my head for comparing relief efforts to an intervention.  Well, Time Magazine seems to be on the bandwagon now as they have called it a “compassionate invasion” by the United States.  In my view, the article starts off by making some comparison to New Orleans and Katrina. Here is a recap of the real problems associated with Katrina.  A difference is that the Haitian government invited the US in almost immediately whereas the Governor of Louisiana did not ask for federal help in such a timely manner. What the media does not say, or does not know, is that the Federal government cannot just send troops willy nilly into any state, even in a disaster, without an official request from that state’s governor.  In the Civil War, the United States did not send troops into Kentucky until the state asked for assistance to rid the Commonwealth of an invading Confederate force.  In any event, the Time article does suggest that for all intents and purposes, Haiti is now the 51st state.  It will be intersting to see how this all turns out and if US intervention this time ends up in something positive for Haiti and for the Western Hemisphere.

US total debt

Who is going to Pay and How? The world is coming to the aid of Haiti as nations and individuals are pledging money.  Earlier this year, several creditor nations had agreed to cancel all Haitian debt but France is now asking those nations to speed up the process of Haitian debt forgiveness.   The global community is pledging all sorts of financial support.  But, the question must be asked: where is this money going to come from?  The US is pledging $100 million.  That comes out of the US treasury.  The US is also footing the enormous bill for deploying troops, transportation and supplies.   The US national debt already is past 50% of the GDP and experts recently warned Uncle Sam to not let the debt rise beyond 60% of GDP.  

Olbermann, Limbaugh Probably Not Best Friends

America is stepping to the plate en masse.  USA Today reports that in 2005, private American donations following Hurricane Wilma, Hurricane Rita and Hurricane Katrina totaled nearly $6.5 billion.  USA Today says that Americans are on pace to surpass that total following the earthquake.  Rush Limbaugh recently took heat for reminding people that President Obama’s pledge of $100 million was from the US Taxpayer.  Limbaugh said that he did not trust the Obama Administration to properly collect and use donations made through the White House web site.  Keith Olbermann, among others, attacked Limbaugh for his statements.  Many have suggested that Limbaugh was encouraging people to not donate monies to relief efforts, but Limbaugh defended himself by saying that he never said any such thing.   As I had commented regarding Pat Robertson,  I am not sure what the value was for Limbaugh’s timeliness in expressing his opinion on the subject as, without evidence to support his fears, he stood very little chance of gaining sympathy for his position.  As it stands, the USA Today report indicates that Americans are indeed opening their wallets.  So, if Limbaugh’s detractors claim he told people not to donate to anyone, this would be proof that listeners don’t necessarily do what he says. 

US Debt to GDP Ratios

Nevertheless, the issue of international debt is something that must be considered.  While a time of crisis is not a time to be pinching pennies, someone has to figure out how meeting the needs of humanity today will not create a larger global crisis tomorrow.  Businessweek published an article that details a potential global debt crisis.  It claims that the US is already way beyond the 60% ratio of debt to GDP as it assert Uncle Sam is running at over 93% of a Debt to GDP ratio.  It puts Iceland at over 300%, Greece at 125%, Spain over 66%, Britain and Ireland around 82% and Mexico a winner at just under 50%.  The monies allocated for earthquake relief do not generate any return income so any contributions made from the public sector of any country comes directly out of the treasury. 

Citizen Taxpayers Carry Gov't Debt Burden

 Jamaica is trying to negotiate its way out of it’s debt crisis and Argentina is struggling to find a pathway from its big hole.   But, it’s not just nations that are teetering on bankruptcy.  Word out of Ho Chi Minh City in Vietnam is that banks there remain burdened with bad debt.   Brazil’s main bank, Banco de Brasil,  is issuing quite a bit of debt at low, but slightly higher, interest rates.   In Europe, Hungary is finding ways to lend to that country’s banks to try to prop up lending.   In the US, banks in Illinois, Minnesota and Utah were recently seized by regulators.   So, while the stock market continues to rise, there are still many landmines remaining in the global financial system.  We are told that we are in recovery, but China is warning that the slew of international debt may be a roadblock to the future.  China is fearful that a global recovery could be stimied by faulty exit strategies by the international community as well as weak demand and high unemployment.

Global Money Tree Drowning in Debt

So, the world is clearly not out of the woods just yet.  The world must respond as it is to the humanitarian crisis in Haiti.  It is completely necessary on many levels for the US to take the lead in helping Haiti immediately and creating an environment for a better Haiti in the future.  And, while Limbaugh’s reference to funds coming from the US treasury was extremely untimely, the question remains for Uncle Sam and the rest of the world: how do we pay for it?  It used to be in America that charitable giving was completely the responsibility of individuals and they gave  what they could.  Since the Great Depression, America and other nations have grown increasingly comfortable with their governments providing funding for domestic and international social and relief efforts.  Unlike individuals though, governments tend to give more than they can afford, reasoning that taxes can always be collected to make up the difference.  But, at some point in time, someone has to pay.  Care needs to be given because solving one crisis by creating a bigger crisis is not much of a solution.

NAM calls for over 1/2" of rain by Sunday Evening

Weather Bottom Line:  I told you that Saturday would be good and it got even warmer than I thought.  Mid 50’s were commonplace across the area.  Now, a system is lifting up from the Gulf and up the Appalachians to bring rain on Sunday.  By Sunday evening, the NAM advertises over a half inch of rain.  I would think somewhere in the neighborhood of .75″ areawide would be a good bet.  As the system lifts northeast, we get slightly cooler air behind it with a decent Martin Luther King Day on tap with highs around 50.  Then a front comes down and gets hung up across the Ohio Valley bringing a few days of clouds and showers with temperatures cooler, but still above seasonal norms into the mid to upper 40’s.

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