The Global Banking Financial Crisis’s and Its Impact on Developing Nations: Case Study Africa.
For several decades the public has witnessed the shift of world global economic policies from countries’ production and stable economic indicators, to wild crazy speculations and market derivatives created to hide the real cause of economic instability which is the printing of the fiasco money and fiscal policy! Plainly stated we cannot continue to run and hide, the problem will not eradicate itself. We have no other alternative than to face what rulers of globalization have created and the consequences.
The FED and the Bank of Japan, have for decades, pioneered the premise that to stabilize an economy more money must be printed. This extra money can be used to fight inflation and other economic pitfalls. The European Central Bank has followed the cause with competition and even surpassed others in the last 20 years by its creation and printing of money to become one of the Apex Printing Houses followed by the Bank of China for the same reasons previously mentioned.
This central bank money manipulation has been a scheme with the consequences postponed for later. During this process, the Social Security’s retirement funds, pension’s funds and other equity funds have made it possible for governments to borrow money using these governments’ control of certain municipalities and countries as collateral to guarantee payment. How can a government who is insolvent guarantee payment to other institutions? These schemes have been growing and developing across the world.
As a result of these lending practices, many Central Banks around the world are and have been becoming very powerful and often oversee government activity in borrowing nations. It is good to have the independence of any Central Bank but when independence grows into ownership by a private group, with different goals, interests and agendas that are not compatible with the borrowing country then disparity results. This has created a fundamental divergence on the Economy and tax policies with their consequences are macroeconomic and concern the interests of all. History has repeated itself on many occasions. For instance, the 2007-2008 crises unofficially started in 2003 to 2004, during that time most of the Wall Street bankers and major banks around the world were aware that a financial disaster loomed in immanency. Even then bankers and financial professionals knew there was to be World Financial Tsunamis that would swallow people around the world’s life savings, homes, retirements and hope.
During 2003-2004 all the indicators for economic performance are in the red but the invisible hand behind the scene shows the DOW JONES, DAX, CAC 40 and many other indexes are high in performance. This has created an illusion in a lot of people’s minds that prosperity is evident so they naturally are proud to be part of the modern day capitalism; however this so called source of wealth is an illusion and deprivation. These same banks were the source of the financial crisis causing several million people to lose their jobs, pensions, homes and every other asset they owned but the banks are too big to fail? Why are these banks too big to fail? Who are the sources of the problems? As a reward, these same banks and insurance companies received 1.5 trillion USD from the USA and financial institutions. Europe and Japan contributed several trillions also. Again, why are the banks too big to fail? Historically, governments have implemented programs to stimulate banks by giving them short term loans to create jobs. These loans many times have proven to be lip service.
If the Central Banks of countries were truly independent and not owned by private organizations, the outcome would be different resulting in public friendly economic and tax policy; a paradigm governments are not currently practicing. The stimulus funds should go directly to the tax payer, this small adjustment would help to re-launch the economies of the USA, Europe or Japan. Conclusively, the stimulus money received by banks and insurance companies alternatively belong to the taxpayer, so far banks receive these funds and still traction persists creating a downward spiral for the worse.
Today, central bankers are more powerful than the heads of state as such central bankers play a very important role in the shape and complexion of the world’s economy. Central banks are like other institutions which are in the business to make profits, but the fallout and consequences are grossly different. Since last December the US Federal Reserve posted capital as $54 billion and $3.57 trillion in assets. This is less than 1.513% cash to asset or liquidity ratio and it becomes worse every month; the European Central Bank 3.68%, Bank of Japan 1.93%, Bank of England 0.8426% and Bank of Canada 0.531%. In 2008 when Lehman Brothers filed for Bankruptcy, they had almost $691 billion of assets and $22 billion of equity; this represents an average of 3% equity to asset ratio.
Each of these Central Banks: The European Central Bank, Bank of Japan, Bank of England, and Bank of Canada are in average, below the level of Lehman Brothers when it filed for bankruptcy; this should conclude that these central banks days are numbered and bankruptcy is imminent. Evidence supporting this conclusion is based on the presumption that the aforementioned central bank’s corresponding governments are so broke they are unable to bail out, let alone support anything, including these Central Banks. Except the bank of China which is above these central banks ratios continues to maintain its economy growth but is hindered by bad decisions the government made a few years ago. China decided to develop and build several residences and commercial buildings which were financed by certain States or Regions because these areas flourished and maintained a commercial surplus. These residences and commercial building are not occupied or almost empty.
According to Dr. Mehenou Amouzou the Bank of China identified the need to stabilize its economy by ridding itself of toxic policies. One of its first restructuring programs was overhaul its credit/loan program and correlate it to the needs of the general population. Bank of China started to liquidate dollars and Euro from its reserves by selling them to buy gold, silver, agriculture land and natural resources. Bank of China has over 1500 tons of gold and continues to buy gold with USD and Euro to further rid itself of the libelous currencies to minimize the risk associated therein which could affect the development and economic expansion by causing insolvency for the country.
After focusing and analyzing the consequential impact that the powers in control of global economic policy have created for developed countries one ponders in complete apprehension the effect this policy will have on developing countries; a nuclear holocaust comes to mind. Several developing countries economic intellects still believe the impact will not approach a crisis; Dr. Mehenou Amouzou calls this approach naïve. Instead, he believes the impact will be monumental and affect generations for many years if not stifled and managed now.
Most of the Western Banks are approaching penurious times in large part because they house more toxic assets on their books perpetrating a strong balance sheet while staving off disaster. These Western Banks affect more than Western civilization. Many African countries have 90% or more of their countries’ reserve funds deposited into the Western Banks mostly due to their paternal relation with the colonizer.
Questionably, these Western Banks remain loyal to their historical creators instituting policies advantageous, beneficial and profit seeking for industrialized countries. At the same time Western Banks overlook evaluation, comparison and diversification of economic policy to further destruct and annihilate the working class general populations of developing countries. In short, the paternal countries do not want to institute policy that will create self-sufficiency in subordinate countries.
The crisis that officially started in 2007 and 2008, that which was highly publicized as a global nightmare in the media was portrayed as inconsequential to African countries; they were unaffected. In fact, this was not the case, it is a complete fabrication and this fabrication caused the world to overlook an already impoverished African nation. Africa was depicted as maintaining more than $200 billion dollars on deposit while the crisis of 2007 affected most of the world as a downward catastrophe. Only the insiders and economic intellectuals peered through the maze of fog set forth by the media to realize the $200 billion that was qualified was in fact only 3% cash and 97% investment in toxic assets; the very same assets that affected and caused chaos in most all other nations because the assets could not be liquidated.
The media’s false advertisement will have a long term effect on African nations and other developing countries because the false advertisement grossly fails to indicate and note the reserve fund phenomenon. Countries like African nations are living off of reserved funds much like the body lives off itself when we have no food to eat. Soon the country like the body will become weak and disfigured, bloated and dysfunctional. Essentially, developing countries will become dearth as the reserves become depleted and insolvency persists. When insolvency occurs, mainly due to mismanagement and bullying by Western Banks and political affluent, will these developing countries be reimbursed? It is highly unlikely these developing countries supported their reserves with a structured insured financial vehicle.
According to Dr. Amouzou, President of an Investment Trade Management, developing countries will face insurmountable challenges in the very near future, some are:
Depletion of their reserve funds and credit stagnation; credit stagnation or the inability to receive funds from institutions will ultimately have the impact of increased debt because the depletion will make it more difficult for the country to service institutions like Commercial Banks, Private or IMF in the circular conundrum. Will the World Banks be dissolved or will they still provide revolving credit after the bank Tsunamis crisis?
Definitely the reserve funds for developing countries will at some point in the near future disappear but with their demise comes a catastrophic consequence; while the credit dissipates, the associated debt will revolve causing serious socio-economic problems. Further political instability in developing countries will reinforce diversion between nations encouraging disorder, dysfunction and disparity; essentially the haves and have-nots will be at odds. The haves will be reluctant to bail out the have-nots to solve the problems created by the Global Economic Finance policies.
After the collapse of the Financial banking system, we are going to hear again from the media and news that the Occident (The Club of Rome, Club of Paris, IMF, World Bank; Bilateral Agencies; etc.) are preparing several meetings to help the developing countries that are affected by the crisis, to cut in half the debt service, to forget them completely or to cut down the principal of the debts in half? It is an intellectual screw, scam, crime! Did the westerner’s Government through their bankers reimburse the Developing countries for the lost funds deposited into their countries? Who is going to be responsible for these losses? At the same time Western banks will revolve the debt owned by these countries and hold them hostage by exorbitant interest rates; the proverbial double standard that will spiral these countries into a modern slavery paradigm!
This situation has previously occurred during World Wars I and II and the associated aftermath. During these wars while African countries were not physically involved in the wars they are manipulated by Westerners who have transferred the debt of these wars into developing countries. This done by capturing and mobilizing their resources, food and manpower so that they are delivered to the Westerners to support its survival. How many people in developing countries need to die so that the Westerners may live?
It seems that developing countries will once again have to assume the fallout of mismanagement and flawed policy and prepare to pay or finance the loss of Western Bank and Governments again. This situation is going to put the continents of developing countries back one hundred years; this is not development its counter-development. Some African leaders lack vision and confuse development initiatives in their countries as personal achievement; this one man show attitude often leaves the general population in total abject poverty.
Stated by Dr. Mehenou Amouzou, the alternative choice for developing countries is to give instruction and direct orders to the reserves funds Managers they are willing to buy; gold, silver and other natural resources. They should further request these precious metals be transferred and hold them in safekeeping in their own countries. As a security measure, to hedge against loss the developing country should diversify and hold some of their reserve in other currencies for example Singapore Dollar, Hong Kong dollar, Norway currency. Bank of China has been using its reserve funds in USD, YEN and EURO to buy a lot of gold and precious stones in anticipation the next economic Tsunami and the bankrupt of several banks and Governments!
African Governments must be aware and cognizant of the current events to prepare themselves for the backlash of Western Banks improprieties. Western Banks will never admit what is happening now and how long these banks are going to hold on before they announce imminent bankruptcy. Of course with this announcement civil unrest will occur so African countries may be faced with riots; the ultimate socio-economic consequence. It will be naïve for these Developing countries to still believe in a Santa Clause Economy.
Developing countries’ banks need to adopt a conservative moderate approach in their banking practices. Since their independence developing countries’ banking practices seldom change to accommodate their countries’ specific interests. To the developed world their banks are just depository banks, collecting funds for Western Banks for a nominal fee (5/6%) per year then make these funds available for the Westerners Banks to manage. The same Western Banks trade on these funds on average of 24 hours daily with a basic profit of 0.5% to 1% per week or better. In one month it will be 2% to 4% and in the year 24% to 48% of the capital deposit, in exchange of 5% to 6% interest per year. Do we have to blame the Western Banks? I do not think so, but the developing countries need real leadership; a leadership that is comfortable and prepared to transact with developed countries on an even playing field. No longer can developing countries sit ideally by and accept the minimum contributions for their prolific involvement. These developing countries are needed by Western Banks so they should be compensated at fair market value.
Developing countries are moving in the right direction, they send their countrymen to Western Universities to learn varieties of subjects including economic practices to become leaders in their home countries. But far too often, these countrymen lack leadership characteristics and fall prey to their western counterparts. These leaders should trust their abilities and design a strategic plan of implementation that will take advantage of their natural resources and offer them to the world at a fair price based on prevailing the market value. This approach Dr. Amouzou maintains will be the only hope for these countries to become economic power they are poised to become. It is very sad that these developing countries continue to wait for assistance and aid in the form of grants and loans from westerners to develop their own budgets that will ultimately lead to their liberation. This means no aid or assistance to developing countries without high associated costs of capital. Westerns do not want developing countries to become liberated; this will prove to be costly for westerners in the long run. Right now they achieve a windfall from current practices.
Why does one government have to rely on another government to provide basic needs to its people? It seems some governments of developing countries accept or even downgrade their worth in the global economy. As such, they prove to be incapable to manage and to lead their population into economic prosperity. It is absurd for some of these autocrat leaders to run their countries upside down. The ruthless are re-elected in perpetuity because the country is vulnerable to penetration by individual power mongers.
The main issue and most viable point I wish to convey in this article is the need for developing countries to rid themselves of subjugation. They need to stop begging for help and help themselves; they have the talent and resources to self-fulfill their initiatives. Currently, they embarrass themselves and the entire country by lack of vision, leadership and overwhelming corruption. Developing countries have the resources; the population is very young and energetic. They do not need any financial assistance or economic aid. These countries need to rely on themselves, declare war on corruption, not a selective corruption war but they need to destabilize the opposition. A good government needs a good opposition to help balance the power structure and maintain a system of checks and balances where everybody is accountable for the wellbeing of its citizens.
Only in developing countries do you see several ONG’S, European other African delegations that come, watch and recommend that the election was done in calm and peace! Do developing countries need other countries to mentor and consult them about electoral organizing? In some areas organizing an election sounds like civil war and hostile takeover where the incapable government has ruled the country with self-interest, nepotism and cronyism all at the expense of the general population bring misery to the people. If developing countries cannot organize these basics infrastructural necessities, then how can they lead with forward thinking vision? Ruling a country for ten years does not mean you are talented or you are perfect to serve the country’s interest. If you try and fail, leave the post and let more capable individuals lead.
The current banking financial crisis is imminent and at the front door of developing countries. They must be conscious and steadfast in their economic approach to stability. This will bring dignity, respect, and self-sufficiency to their children, grand-children and great grandchildren and rid them of the perception of being a marginalized municipality in a marginalized country on a marginalized continent.
For more information from Dr. Amouzou please see his previous articles:
- COUP D’ETAT AU BURKINA : L’IMAGE DE L’AFRIQUE ENCORE SOUILLEE!!
- CAPITALISME ET DEVELOPEMENT : MYTHE OU REALITE?
- POURQUOI L’AFRIQUE DOIT – ELLE ANNULER LES ACCORDS ECONOMIQUES, MILITAIRES ET POLITIQUES AVEC LA FRANCE ?
- WHY AFRICA MUST CANCEL ECONOMIC AGREEMENTS, POLITICAL AND MILITARY WITH FRANCE?
- CULTURE ET DEVELOPPEMENT EN AFRIQUE
- THE WORLD’S CURRENT FINANCIAL CRISIS!! OR MORE COMMONLY KNOWN AS “FINANCIAL DÉJÀ VU”!!
- LA SANTE EN AFRIQUE: COULOIR DE LA MORT?? CHLORE, FLUOR = ASTHME, ECZEMA, CANCER DE LA VESSIE, LES MALADIES CARDIAQUES ETC!!!!
- NIGERIA THE ECONOMY AND MILITARY SUPER POWER
- WEST AFRICA SINGLE CURRENCY: THE LESSON TO LEARN FROM EUROPEAN SINGLE CURRENCY
- THE ECONOMIC DECLINE OF THE USA EMPIRE: THE AIRPLANE WITHOUT THE PILOT –
- THE PERSPECTIVE ON GLOBAL ECONOMIC AND FINANCIAL STATUS FOR 2013 AND ITS IMPACT ON THE FUTURE OF THE GLOBAL ECONOMY –
- EUROPEAN CENTRAL BANK'S OUTRIGHT MONETARY TRANSACTIONS (OMT): THE BAZOOKA APPROACH –
- COULD THE WORLD AND THE EUROPEAN FINANCIAL SYSTEMS SURVIVE THIS WORLD WAR III FINANCIAL CRISIS OR IT IS THE END OF THE WESTERN CIVILIZATIONS? –
- CORRUPTION AND DEVELOPMENT IN THE DEVELOPING COUNTRIES –
- THE WORLD FINANCIAL HONEY MOON IS OVER: DEBT CRISIS CONTINUES TO WAGE WAR ON ECONOMY POLICY –
Dr. Amouzou received his Master in Business, from the European Advanced Institute of Management, also a Certificate in Finance and Investment in Paris, France. He completed his Post Graduation work in Political Strategy, International Relation and Defense Strategies and earned his Ph.D. in International Finance.
Contribution to this article and the aforementioned series was made by Byron K. Belser. Mr. Belser assists Dr. Amouzou; he holds a Masters of Arts degree in Development Economics a Law degree.
Raymond Bernhard West from West International Petroleum LLC; Fundacion Paraiso Sin Fronteras; Amouzou Nkrumah Production.