The world economy is worth $44.4 trillion and grew 5.1% in 2006. The economies of China and India have contributed largely to this growth, China has experienced growth at a staggering rate of 10.7% in 2006, with its Gross Domestic Product (GDP) of $2.2 trillion. India, the other rising star, experienced a growth rate of 8.5% in 2006, increasing its GDP to $780 billion. However, the world’s largest and most successful economy by far is the United States, having a GDP of $12.45 trillion, a massive 28% of the world’s total GDP.
These figures suggest a level of wealth in the world today which is unprecedented in world history. The secret of this level of wealth is said to be a sound economy built upon foundations of solid Capitalism. The market driven economy with its principles of supply and demand, the invisible hand and liberalised free trade once combined with guidance of the appropriate fiscal and monetary policies are said to build a successful economy. This is what is claimed to be the formula behind the wealth of the Western world and now to the rising stars of China and India. However if one examines the workings of the current economic system it is clearly apparent that the main driver of economic growth today is an intangible factor, namely confidence.
The United States is the world’s largest economy, it is the main engine for economic activity in the world and its huge level of consumption is responsible for most of the growth being experienced by China and India. The US imports 9% of the worlds imports and 25% of the worlds oil. The structure of the US economy is that it is primarily a consumer based economy, and like the UK its manufacturing base is in decline. The manufacturing of goods and the labour behind them are being outsourced to cheaper locations, China has benefited from this immensely as it is now a factory for the US as 70% of its manufactured good end up in the US. The US at the moment only manufactures strategic items such as heavy machinery and items it considers of national interest and refuses to transfer such technology such as arms, aircrafts, motor vehicle parts, computers and telecommunications. The US imports $1.7 trillion (the most in the world) 32% of this is consumer goods. This process of outsourcing has meant that the US has changed over the last 20 years from an economy that used to have net exports to one that now has net imports. The US consumer is now buying more from overseas than ever before, so much so that the US now has a huge trade imbalance with the rest of the world. Its trade deficit or the amount it imports more than it exports, with the rest of the world stood at a record $763.6 billion in 2006.
This incredible figure is effectively the money US owes the rest of the world for the goods it has bought. If this was not astounding enough, the US has a foreign debt of $10 trillion! To put this in to perspective, this is approximately 80% of US GDP and 23% of total foreign debt in the world, US debt is seven times the amount of dollars in circulation (M1 Money Supply), which is only $1.3 trillion. This means that the debt actually doesn’t exist i.e. there is no currency which represents the debt. $318 billion was spent on interest payments servicing this debt, out of total tax revenue of $1.9 trillion. The UK also has a similar debt of $8 trillion, almost 3 and a half times its GDP. To compare this to rest of the world, Argentina defaulted on it $93 billion during the South American economic crisis of 2002. Pakistan labours under poverty, largely due to an external debt of $42 billion. Going by these figures alone, it would be intuitive to consider the US and the UK way past the point of economic collapse, yet the reality is very different. How is it that despite owing such huge sums to the rest of the world the US and similar economies seem to be growing all the time?
The answer lies simply in the confidence people have in such economies. It is perceived by all the players in the ‘market’ that the US though not able to do so now, however due to their strength they will one day be able to pay off the debt that they owe. This confidence stems from the continued vigorous economic activity in the US by the average consumer. The average consumer is able to purchase all the necessary basic goods and services needed to satisfy basic needs and luxury goods on a regular basis. However as the US is continually importing more than it is exporting, the result is that wealth should be leaving the country in order to pay for the goods and services it is consuming. Where is the US getting this wealth from? The answer is debt.Like the UK, the US has been experiencing economic growth that has been fuelled by the expansion of personal debt, which in turn is being fuelled by the high price of housing or real estate. As the cost of housing rises, house owners have increasingly been taking out personal debt, offering equity in their homes as collateral. This process of effectively re-mortgaging homes in order to fund an extravagant lifestyle has been a nation wide phenomenon for the US and the UK. As long as house prices continue to rise, consumers will be able to take out more debt against the value of their homes. This practice has been evolving since the 1990’s, and we now have a situation where house prices are so high that they have outstripped salaries by several times. This means that the situation has reached a dangerous level where this debt is now struggling to be serviced and houses are increasingly too expensive to be bought by people. US household debt is $8.5 trillion and 20% of households have more debt then assets.
This situation is not sustainable. House prices have been rising only due to demand but also speculation. Speculators are seeking to make profits by buying houses, holding on to them and selling them on for a higher price. This process of speculation is fuelled entirely by the confidence speculators have that house prices will continue to rise.
As it is confidence then that is at the base of the current economic boom being experienced by Western economies, it is no wonder that they are subject to uncertainty. This confidence could be shattered if enough people feel that economic indicators in major economies in the world are not looking good. For instance, on 2nd April 2007 New Century Inc became the largest sub-prime mortgage lender in the US to declare bankruptcy due to the increasing number of defaults from borrowers. This could be viewed as the beginning of the end of the housing market boom in the US, as borrowers are no longer able to finance their debts. If enough people perceive this to be so, the housing market will begin to be flooded with people trying to quickly cash in on their homes before prices start to crash. As more homes come on to the market, a downward spiral is created as the extra supply of housing on the market forces prices down, causing yet more people to panic and try to sell their houses which continues the cycle. This would have a knock on effect on the rest of the economy, which so heavily relies on this perceived confidence in the real estate market, which would then impact the world who rely on the US economy most of their exports.
Based on these factors it is clear that it is not a matter of ‘if’ but ‘when’ the US economy will experience an end to its inflating bubble. The economic speculation on housing markets across the world is driving economic spending and thus growth. This speculation is inherently instable by its nature. This was the exact scenario which preceded the Great Depression of the early 20th Century. In that case people were not speculating on the housing market but rather the stock market. Back then people were again borrowing on credit in order to buy stocks in the hope of making a profit in expectation of the prices rising. This clearly had disastrous consequences and the current scenario is eerily similar.
Global GDP $44 Trillion (2005): US 12.4t; Japan 4.5t; Germany 2.7t; China 2.2t; UK 2.2t; France 2.1t
Global National Debt $44 trillion (2006): US $10t; UK $8.2t; Germany $3.9t; France $3.4t; Japan $1.9t
Global imports $10.4 trillion (2005): US $1.7t; Germany $773b; China $666b; Japan $514b; UK $510b
[Article written by Adnan Khan]
About this blog
In recent times a plethora of misconceptions, misrepresentation and myths have been forged about Islam
and Muslims. Many western influentials from politicians, policymakers to judges have taken it upon
themselves to undermine the Islamic beliefs, values and rules so to make it palatable to their
egotistic minds and the secular liberal thoughts.
This blog is dedicated:-
1. To argue the point for Islam in its belief and systems and to refute the misconceptions.
2. To expose the weakness and contradictions of all forms of secularism.
and Muslims. Many western influentials from politicians, policymakers to judges have taken it upon
themselves to undermine the Islamic beliefs, values and rules so to make it palatable to their
egotistic minds and the secular liberal thoughts.
This blog is dedicated:-
1. To argue the point for Islam in its belief and systems and to refute the misconceptions.
2. To expose the weakness and contradictions of all forms of secularism.
9 Jul 2008
Subscribe to:
Post Comments (Atom)
What they said...
“Islam represented the greatest military power on earth…It was the foremost economic power in the world…It had achieved the highest level so far in human history, in the arts and sciences of civilization...Islam in contrast created a world civilization, poly-ethnic, multiracial, international, one might even say intercontinental.”
[Bernard Lewis, Professor of Near Eastern Studies, Orientalist and Historian, 2001]
"There was once a civilization that was the greatest in the world. It was able to create a continental super-state that stretched from ocean to ocean, and from northern climes to tropics and deserts…the civilization I'm talking about was the Islamic world from the year 800 to 1600… Although we are often unaware of our indebtedness to this other civilization, its gifts are very much a part of our heritage"
[Carly Fiorina, ex-CEO of Hewlett-Packard, 2001]
"For the first three centuries of its existence (circ. A.D 650-1000) the realm of Islam was the most civilized and progressive portion of the world. Studded with splendid cities, gracious mosques and quiet universities where the wisdom of the ancient world was preserved and appreciated, the Moslem world offered a striking contrast to the Christian West, then sunk in the night of the Dark Ages."
[Lothrop Stoddard, Ph.D (Harvard), American political theorist and historian, 1932]
"Medieval Islam was technologically advanced and open to innovation. It achieved far higher literacy rates than in contemporary Europe;it assimilated the legacy of classical Greek civilization to such a degree that many classical books are now known to us only through Arabic copies. It invented windmills ,trigonometry, lateen sails and made major advances in metallurgy, mechanical and chemical engineering and irrigation methods. In the middle-ages the flow of technology was overwhelmingly from Islam to Europe rather from Europe to Islam. Only after the 1500's did the net direction of flow begin to reverse."
[Jared Diamond, UCLA sociologist and Author, 1997]
"No other society has such a record of success in uniting in an equality of status, of opportunity and endeavour so many and so varied races of mankind. The great Muslim communities of Africa, India and Indonesia, perhaps also the small community in Japan, show that Islam has still the power to reconcile apparently irreconcilable elements of race and tradition. If ever the opposition of the great societies of the East and west is to be replaced by cooperation, the mediation of Islam is an indispensable condition."
[Hamilton Alexander Rosskeen Gibb, Professor at Harvard University, 1932]
“The Muhammadan Law which is binding on all -- from the crowned head to the meanest subject is a law interwoven with a system of the wisest, the most learned and the most enlightened jurisprudence that ever existed in the world.”
[Edmund Burke, British Statesman and Philosopher, 1789]
"The Exile here is not like in our homeland. The Turks hold respectable Jews in esteem. Here and in Alexandria, Egypt, Jews are the chief officers and administrators of the customs, and the king’s revenues. No injuries are perpetuated against them in all the empire. Only this year, in consequence of the extraordinary expenditure caused by the war against Shah Tahmsap al-Sufi, were the Jews required to make advances of loans to the princes."
[David dei Rossi, Jewish Traveller 17CE, quoted by Norman A. Stillman, The Jews of Arab Lands]
"The notable religious tolerance towards Christians and Jew under Muslim rule had given way to the uncompromising zealotry of Spanish Inquisition. Jews and Muslims thus fled Spain with large numbers of Jews immigrating to the Ottoman Empire which was known for its tolerance to the Jews."
[Graham Fuller, Author and former CIA, 1995]
“If there is much misunderstanding in the West about the nature of Islam, there is also much ignorance about the debt our own culture and civilization owe to the Islamic world. It is a failure, which stems, I think, from the straightjacket of history, which we have inherited. The medieval Islamic world, from central Asia to the shores of the Atlantic, was a world where scholars and men of learning flourished. But because we have tended to see Islam as the enemy of the West, as an alien culture, society, and systems of beliefs, we have tended to ignore or erase its great relevance to our own history”
[Charles Philip Arthur George, HRH The Prince of Wales, 1993]
"...Not being subject to the Sharia, Jews and Christians were free to go to their own religious authorities for adjudication of disputes; but in many cases they went instead to the [Muslim] Qadi"
[Richard W. Bulliet, Professor of History and Author, 2004]
"Here in the land of the Turks we have nothing to complain of. We possess great fortunes; much gold and silver are in our hands. We are not oppressed by heavy taxes and our commerce is free and unhindered. Rich are the fruits of the earth. Everything is cheap and each one of us lives in freedom. Here a Jew is not compelled to wear a yellow star as a badge of shame as is the case in Germany where even wealth and great fortune is a curse for a Jew because he therewith arouses jealousy among the Christians and they devise all kinds of slander against him to rob him of his gold. Arise my brethren, gird up your loins, collect up your forces and come to us."
[In his book 'Constantinople', Philip Mansel quotes a rabbi in Turkey writing to his brethren in Europe where they were facing increasing persecution after 1453]
"Praise be to the beneficent God for his mercy towards me! Kings of the earth, to whom his [the Caliph’s] magnificence and power are known, bring gifts to him, conciliating his favour by costly presents, such as the king of the Germans, the king of the Gebalim, the king of Constantinople, and others. All their gifts pass through my hands, and I am charged with making gifts in return. (Let my lips express praise to the God in heaven who so far extends his loving kindness towards me without any merit of my own, but in the fullness of his mercies.) I always ask the ambassadors of these monarchs about our brethren the Jews, the remnant of the captivity, whether they have heard anything concerning the deliverance of those who have pined in bondage and had found no rest."
[Hasdai Ibn Shaprut (915-990 CE) Jewish physician, chief minister of Islamic Caliphate in Cordova, 'The Jewish Caravan']
"In Baghdad there are about forty thousand Jews, and they dwell in security, prosperity, and honour under the great Caliph [al-Mustanjid, 1160-70 CE], and amongst them are great sages, the Heads of the Academies engaged in the study of the Law…’"
[Benjamin of Tudela, Rabbi in Baghdad in the year 1168 CE, 'The Jew in the Medieval World']
"Those Eastern thinkers of the ninth century laid down, on the basis of their theology, the principle of the Rights of Man, in those very terms, comprehending the rights of individual liberty, and of inviolability of person and property; described the supreme power in Islam, or Califate, as based on a contract, implying conditions of capacity and performance, and subject to cancellation if the conditions under the contract were not fulfilled; elaborated a Law of War of which the humane, chivalrous prescriptions would have put to the blush certain belligerents in the Great War; expounded a doctrine of toleration of non-Moslem creeds so liberal that our West had to wait a thousand years before seeing equivalent principles adopted.
[Leon Ostorog, French Jurist]
"The debt of our science to that of the Arabs does not consist in startling discoveries or revolutionary theories; science owes a great deal more to Arab culture, it owes its existence"
[Robert Briffault, Novelist and Historian, 1928]
"The only effective link between the old and the new science is afforded by the Arabs. The dark ages come as an utter gap in the scientific history of Europe, and for more than a thousand years there was not a scientific man of note except in Arabia"
[Oliver Joseph Lodge, Writer and Professor of Physics, 1893]
“Thus, when Muslims crossed the straits of Gibraltar from North Africa in 711 and invaded the Iberian Peninsula, Jews welcomed them as liberators from Christian Persecution.”
[Zion Zohar, Jewish scholar at Florida International University, 2005]
[Bernard Lewis, Professor of Near Eastern Studies, Orientalist and Historian, 2001]
"There was once a civilization that was the greatest in the world. It was able to create a continental super-state that stretched from ocean to ocean, and from northern climes to tropics and deserts…the civilization I'm talking about was the Islamic world from the year 800 to 1600… Although we are often unaware of our indebtedness to this other civilization, its gifts are very much a part of our heritage"
[Carly Fiorina, ex-CEO of Hewlett-Packard, 2001]
"For the first three centuries of its existence (circ. A.D 650-1000) the realm of Islam was the most civilized and progressive portion of the world. Studded with splendid cities, gracious mosques and quiet universities where the wisdom of the ancient world was preserved and appreciated, the Moslem world offered a striking contrast to the Christian West, then sunk in the night of the Dark Ages."
[Lothrop Stoddard, Ph.D (Harvard), American political theorist and historian, 1932]
"Medieval Islam was technologically advanced and open to innovation. It achieved far higher literacy rates than in contemporary Europe;it assimilated the legacy of classical Greek civilization to such a degree that many classical books are now known to us only through Arabic copies. It invented windmills ,trigonometry, lateen sails and made major advances in metallurgy, mechanical and chemical engineering and irrigation methods. In the middle-ages the flow of technology was overwhelmingly from Islam to Europe rather from Europe to Islam. Only after the 1500's did the net direction of flow begin to reverse."
[Jared Diamond, UCLA sociologist and Author, 1997]
"No other society has such a record of success in uniting in an equality of status, of opportunity and endeavour so many and so varied races of mankind. The great Muslim communities of Africa, India and Indonesia, perhaps also the small community in Japan, show that Islam has still the power to reconcile apparently irreconcilable elements of race and tradition. If ever the opposition of the great societies of the East and west is to be replaced by cooperation, the mediation of Islam is an indispensable condition."
[Hamilton Alexander Rosskeen Gibb, Professor at Harvard University, 1932]
“The Muhammadan Law which is binding on all -- from the crowned head to the meanest subject is a law interwoven with a system of the wisest, the most learned and the most enlightened jurisprudence that ever existed in the world.”
[Edmund Burke, British Statesman and Philosopher, 1789]
"The Exile here is not like in our homeland. The Turks hold respectable Jews in esteem. Here and in Alexandria, Egypt, Jews are the chief officers and administrators of the customs, and the king’s revenues. No injuries are perpetuated against them in all the empire. Only this year, in consequence of the extraordinary expenditure caused by the war against Shah Tahmsap al-Sufi, were the Jews required to make advances of loans to the princes."
[David dei Rossi, Jewish Traveller 17CE, quoted by Norman A. Stillman, The Jews of Arab Lands]
"The notable religious tolerance towards Christians and Jew under Muslim rule had given way to the uncompromising zealotry of Spanish Inquisition. Jews and Muslims thus fled Spain with large numbers of Jews immigrating to the Ottoman Empire which was known for its tolerance to the Jews."
[Graham Fuller, Author and former CIA, 1995]
“If there is much misunderstanding in the West about the nature of Islam, there is also much ignorance about the debt our own culture and civilization owe to the Islamic world. It is a failure, which stems, I think, from the straightjacket of history, which we have inherited. The medieval Islamic world, from central Asia to the shores of the Atlantic, was a world where scholars and men of learning flourished. But because we have tended to see Islam as the enemy of the West, as an alien culture, society, and systems of beliefs, we have tended to ignore or erase its great relevance to our own history”
[Charles Philip Arthur George, HRH The Prince of Wales, 1993]
"...Not being subject to the Sharia, Jews and Christians were free to go to their own religious authorities for adjudication of disputes; but in many cases they went instead to the [Muslim] Qadi"
[Richard W. Bulliet, Professor of History and Author, 2004]
"Here in the land of the Turks we have nothing to complain of. We possess great fortunes; much gold and silver are in our hands. We are not oppressed by heavy taxes and our commerce is free and unhindered. Rich are the fruits of the earth. Everything is cheap and each one of us lives in freedom. Here a Jew is not compelled to wear a yellow star as a badge of shame as is the case in Germany where even wealth and great fortune is a curse for a Jew because he therewith arouses jealousy among the Christians and they devise all kinds of slander against him to rob him of his gold. Arise my brethren, gird up your loins, collect up your forces and come to us."
[In his book 'Constantinople', Philip Mansel quotes a rabbi in Turkey writing to his brethren in Europe where they were facing increasing persecution after 1453]
"Praise be to the beneficent God for his mercy towards me! Kings of the earth, to whom his [the Caliph’s] magnificence and power are known, bring gifts to him, conciliating his favour by costly presents, such as the king of the Germans, the king of the Gebalim, the king of Constantinople, and others. All their gifts pass through my hands, and I am charged with making gifts in return. (Let my lips express praise to the God in heaven who so far extends his loving kindness towards me without any merit of my own, but in the fullness of his mercies.) I always ask the ambassadors of these monarchs about our brethren the Jews, the remnant of the captivity, whether they have heard anything concerning the deliverance of those who have pined in bondage and had found no rest."
[Hasdai Ibn Shaprut (915-990 CE) Jewish physician, chief minister of Islamic Caliphate in Cordova, 'The Jewish Caravan']
"In Baghdad there are about forty thousand Jews, and they dwell in security, prosperity, and honour under the great Caliph [al-Mustanjid, 1160-70 CE], and amongst them are great sages, the Heads of the Academies engaged in the study of the Law…’"
[Benjamin of Tudela, Rabbi in Baghdad in the year 1168 CE, 'The Jew in the Medieval World']
"Those Eastern thinkers of the ninth century laid down, on the basis of their theology, the principle of the Rights of Man, in those very terms, comprehending the rights of individual liberty, and of inviolability of person and property; described the supreme power in Islam, or Califate, as based on a contract, implying conditions of capacity and performance, and subject to cancellation if the conditions under the contract were not fulfilled; elaborated a Law of War of which the humane, chivalrous prescriptions would have put to the blush certain belligerents in the Great War; expounded a doctrine of toleration of non-Moslem creeds so liberal that our West had to wait a thousand years before seeing equivalent principles adopted.
[Leon Ostorog, French Jurist]
"The debt of our science to that of the Arabs does not consist in startling discoveries or revolutionary theories; science owes a great deal more to Arab culture, it owes its existence"
[Robert Briffault, Novelist and Historian, 1928]
"The only effective link between the old and the new science is afforded by the Arabs. The dark ages come as an utter gap in the scientific history of Europe, and for more than a thousand years there was not a scientific man of note except in Arabia"
[Oliver Joseph Lodge, Writer and Professor of Physics, 1893]
“Thus, when Muslims crossed the straits of Gibraltar from North Africa in 711 and invaded the Iberian Peninsula, Jews welcomed them as liberators from Christian Persecution.”
[Zion Zohar, Jewish scholar at Florida International University, 2005]
“Throughout much of the period in question, Arabic served as the global language of scholarship, and learned men of all stripes could travel widely and hold serious and nuanced discussions in this lingua franca. Medieval Western scholars who wanted access to the latest findings also needed to master the Arabic Tongue or work from translations by those who had done so.”
[Jonathan Lyons, Author, Writer and Lecturer, 2009]
No comments:
Post a Comment