[When the Harper government runs a deficit, where will the money come from? -jlt]
| Faced with the collapse of private pension, health care and financing systems, Obama will have every reason to use his mandate to socialize medicine, pensions and many other aspects of US economic life. |
Subprime mortgages were the beginning, not the end, of a global financial crisis, and in recognition of this fact equity markets have crashed. The proximate cause of this week's retreat in equity markets to the lowest levels since the 1990s was the collapse of loans to American commercial real estate, which in turn implies the collapse of insurance companies and pension funds. Americans who relied on private pension funds, whether through their employer or insurance companies, will lose part or all of their pensions.
That is why it is so difficult to rescue General Motors, which has said that it may not last the year without official help. Not only stocks, but many of the fixed-income assets owned by insurance companies have fallen by half during 2008, including commercial mortgage-backed securities, and the capital securities of some commercial banks. Citigroup's preferred shares issued last March traded on November 20 at 50 cents on the dollar.
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| To save, Americans must sell goods and services to someone else, and a glance at the globe makes clear who that must be: nearly half the world's population, and most of the world's capacity for economic growth, is concentrated in China and the Pacific Littoral....China and America have far more to gain from cooperation than from conflict. |
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