Some boast that the liquidity crisis has been brilliantly archived. The Fed and the other central banks (whose independence of their respective Governments, but not always of the Fed, is sacred) have now learned how to create new ones, many fantastillion dollars worth. Don't worry is the catchword, it is not like in 1929 when gold was there, that “barbarian” relic!

Some are proud to have tucked away, so far, the solvency crisis. Governments and Governors are financing the self-proclaimed “system” by piling up lots of junk as collateral, while banks are authorized or sometimes encouraged to not let the true losses emerge, and reward managers for the brilliant results thus obtained. Don't worry, it is not like in 1929, when such practices were leading to imprisonment or suicide!

Some pretend to have curbed the confidence crisis and its harshest repercussions on the real economy. Even Governments, in fact, have become pretty clever and one night is enough for them to cavalierly pass from Friedman to Keynes, the former being used until yesterday to legitimize privatization of public goods and lucrative monopolies, the latter being a natural reference, against his will, whenever there is to burden the community, through the increase of public debt and a surely coming inflation, with the incommensurable losses of financial capitalism. Don't worry, it is not like in 1929, we are no longer in the stone age (sorry, the gold age)!

Such boasts, prides and pretenses allow governments and bankers to divert public opinion and their own reflection from the painful reality of the crises that follow the financial one, namely, in increasing-gravity order: marketism crisis, dollar crisis, legitimation crisis and governance crisis. Exposition reasons and the difficulty of synthesizing suggest to look at these crises one by one, without forgetting, however, that they are actually intertwined. Moreover, they constitute, together with the financial and economic crisis (liquidity, solvency, confidence/demand), several aspects of a single global crisis, to understand which a multidisciplinary approach is required. The so-called “imperialism of the economic science” has never been so much inappropriate to the need. For example, one should not talk of the currency without having in mind some categories of power (history and political science) and without considering some emotions capable of arousing mass phenomena like euphoria and panic (behavioral psychology, psychology of the masses and experimental neuro-psychiatry).

I borrow from the Italian Minister of the Economy the expression marketism crisis for its being so concise and telling. Others speak of the end of market fundamentalism, of the neo-con economy, of an unbridled and unruled market. But we all speak of the same thing: the economic ideology that has been dominating unopposed for three decades, instrumentum regni of the American hegemony.

Deregulation, the magic word waved by Reagan-Thatcher and their brave emulators, has allowed the “system” (bank-finance-markets) to create new financial instruments backed by credits of dubious exigibility, and “vehicle-societies” necessary for decomposing, recomposing and dressing them up in various guises in order to finally stuff them in the portfolios of the equities destined to invest our savings in; to take risks with leverages (debt to equity ratios) as high as 30-50:1 (or more), in (substantial) disregard of the Basel norms and national rules, that may be applied to banks only; to pursue short-term profits disregarding “external” diseconomies (the affected externals are us, our living environment, our dignity as workers and individuals) and the costs projected into the future (our grandchildren do not vote); to ignore in their speculative fury indexes that are under everybody's eyes, like Fischer's on the trend of real estate prices, and to distribute the fake wealth thus created among its producers (the “sorcerer's apprentices” and their shareholders), thus fueling ostentatious consumption models, symbolic of the new global elite, the distorted use of resources, the richness of yachts and jets and the poverty of hospitals and schools, the underproduction of essential goods, most of them public, and the overproduction of superfluous goods, always private.

In order to make all this happen, it was necessary beforehand to strip the regulation and surveillance authorities in the banking and financial system of most of their powers, and encourage them to not apply with due diligence the remaining ones. Done. Care to do that, at the pressing request (immoral suasion) of the United States, has been taken by politicians of several countries we elected with the task to protect our interests, a democratic counterbalance to the huge power of financial capitalism (alas, an unequal national counterbalance to global capital; but I will talk about that later: one crisis at a time!). A crime, for sure, but what for?

The first motive for the crime: to allow to finance the US deficit of current expenditure balance, hence of the American wars, without the corresponding taxation of the American people. Probably the consensus on the Iraqi war would have collapsed in the face of a previous democratic discussion about its costs and financing methods, both in the US and in the allied countries.

The second motive for the crime: to allow the weakest population layers to gain access to the property of their house and to other goods. It would then be these Americans, dispossessed today of their homes and forced to live in tents or in rigged up shelters, the ultimate “beneficiaries” of the crime, the ones who did not see one cent of the trillions of public dollars poured over Wall Street! This motive would be a justification for discharging the political and financial managers who erred, OK, but for too much love for the people. I stop here because we are on the verge of crime support.

Anyway, this argument is pointless, because no trial is in sight. The majority of those managers have just self-discharged, self-promoted and self-gratified, ready to go on as before and, if possible, worse than before “with other people's money”, as Luciano Gallino says (University of Turin, 2009). It is better, then, to limit ourselves to check what has been done so far of the solemn intentions proclaimed in London last April by the Twenty (who still look to be getting their act together).

As to the United States, Barry Eichengreen (Eurointelligence, 2009) thinks that “the Administration’s much vaunted proposals for regulatory reform have been reduced to rearranging the deck-chairs on the Titanic”. In fact: 1) about bank re-capitalization, “rather than the $275 billion of new bank capital deemed necessary by the IMF, the Treasury’s infamous stress tests concluded that all that was needed was the $75 billion that could be raised from private sources: More would have been better. We would not be looking forward to a credit-less recovery. But injecting public money was impossible for political reasons”; 2) “the banks have pushed back against significantly tighter regulation. There clearly will be no new Glass-Steagall Act over their opposition. There will be no attempt to break up institutions that are both too big to fail and too big to save. There will be no meaningful reform of executive compensation”. (The new AIG President, rescued with public money, for example, will earn in total thirty times more than President Obama); 3) “the housing industry similarly pushed back against giving bankruptcy judges new power to modify mortgages. This key provision of the Obama Administration’s housing package has not made its way through the Senate. The regulators themselves have pushed back against the creation of a unified supervisor”.

Similar obstacles, made worse by the possibility of national States' vetoes, were met by the new regulations in the European Union. 1) the IMF (Global Financial Stability Report, April 2009) estimates that in the euro-zone about 900 billion dollars of bank writedowns will be necessary, only 150 of which done in the biennium 2007-2008 and the others postponed to 2009-2010 (in the US the amount is over 1000 billions, but in the biennium 2007-2008 almost a half of those has already been ascertained). Proposals of a European initiative for the creation of an Agency tasked with carrying out the necessary re-capitalizations do not seem to meet the necessary consensus. Against them people argue that the resources destined to reorganizations come from national contributions and that surveillance too is mostly national. So, the Brussels Commission limited itself to working out a procedure for authorizing the reorganization plans of European banks in difficulties: harmonized parameters for the stress tests, diagnosis of the problematic assets and a restructuring plan for recovering profitability in the long term envisaging a change in the business model, requiring in many cases liquidation and a scaling down of activities. The attempt is to metabolize the enormous flow of public aids to the sector and to restore conditions of general profitability in the long term, minimizing distortions to competition and to the single market. No supra-national body is there to assure that the actual application of the harmonized parameters in each member State will not produce distortions or will undermine the restoration of confidence. No supranational approach is there to help to limit the risk of cross-border bank insolvency, as the cases of Fortis and Hypo Real Estate showed. 2) As to surveillance, a compromise has been reached on the basis of the proposals by the De Larosière Commission, consisting in the distinction between micro- and macro-supervision. Micro-supervision is concerned with the surveillance over individual mediators and is entrusted to the European System of financial supervisors, a body composed of representatives of the three types of national supervising authorities over banks, insurances and stock exchanges in the 27 member States. Macro-supervision's objective, instead, is financial stability and macro-prudential surveillance over big financial institutions with trans-national activities, and is entrusted to the European Council of systemic risks, presided over by a man chosen by the ECB Council (he should be the ECB President himself, appointed indirectly). It is not clear yet who and how shall control the rating Agencies, how the Credit Default Swaps shall be dealt with, etc. The magnitude of the European reform could be judged in the autumn, when the Brussels Commission will present to the Council and to the Parliament the proposed directives, that should enter into force in 2010.

Some want people to believe that also the dollar crisis, i.e. its role as international currency, has been exorcised. To demonstrate the contrary, I will not cite theoretical economists, but the very practical billionaire Warren Buffet (NYT, 2009). In this way I should convince even the by-now disenchanted Queen Elizabeth. In 2009 the US-balance deficit will rise to about 13% of GDP (1800 billion dollars), making its public debt explode to 56% of GDP by the end of the year, to the tune of 1% per month. “An increase of public debt -Buffet reminds us- can be financed in three ways: by asking for money to be lent by foreigners, by asking for money to be lent by our citizens, or, in roundabout ways, by stamping money”. As to the first financing method, “the payments-balance deficit -dollars that we forcefully dish out to the rest of the world and which have to be invested- will amount this year to about 400 billions”. One must assume that they are totally reinvested, beginning with China, in buying American State-bonds, but “some countries may decide that buying shares, real estate properties or entire American companies makes more sense than stuffing oneself with bonds denominated in dollars. Signs of that are multiplying recently”. As to the second method, “let us assume that Americans save 500 billion dollars, which is much more than what they saved in the last years, but is perhaps in line with the new mood of the nation... and that they choose to invest all of their savings in American State-bonds. Even with all these heroic assumptions, the Treasury will be forced to find another 900 billion dollars to finance the remaining part of the 1800 billions debt that it is issuing. The mint's rotaries will have to work overtime”. Buffet calls for stopping the increase of public debt, but acknowledges that rising taxes or cutting expenditures may jeopardize the reelection of congressmen, while “a higher inflation rate never requires to be voted on and cannot be charged to specific actions promoted by a representative of the people”.

On the other hand, Larry Summers himself, in a speech at the Peterson Institute for International Economics, reported on by Fred Bergsten and Arvind Subramanian (FT, 2009), admitted that there is a contradiction between the status of superpower and the growing dependence on finances from abroad, and announced a policy aimed to reduce the deficit with foreign countries (increasing exports and reducing imports). This implies a devaluation of the dollar, in particular relative to the currencies enjoying the most significant surpluses with the United States, which could spark off a spiral of competitive devaluations and a trade war.

It is not a surprise that China, at the head of the BRIC countries, put forward once more the proposal of a currency to be issued independently of individual States, a world currency to be created taking the Special Drawing Rights (SDRs) as the starting point (a world currency unit, as Alfonso Iozzo and myself were proposing on this review in 2006). It does not come as a surprise the decision by those countries to replace the dollar with their own currencies for paying the transactions among themselves, and often with the respective areas of most intensive exchanges. This is also reinforcing the tendency, already going on for some time, towards a progressive de-dollarization of the world economy and towards its transformation into a multicurrency foreign exchange system which, answering in a disordered fashion to the need of diversifying, may result costly, complex and risky.

The Chinese project is opposed not only by the United States (for understandable political reasons, not coinciding with the real economic interests of the American citizens), but also by the European Union, and that is not understandable under any aspect. As Lucio Levi observed (L’Unità Europea, 2009, n. 425-26), “Here lies Europe's malady. Here is the deepest reason for the citizens' disaffection with the European institutions. Commissioner Almunia, by saying no to the Chinese plan, chose to continue the policy of subordination to the USA in a moment when the world is evolving towards a multipolar order and the US needs to be helped to share with others the political and economic responsibilities it cannot any longer fulfill alone. It is an eschewing policy that has no justification. The EU, thanks to the euro, would indeed have the power to win the US resistance and start realizing the project of a world currency”.

The amount of public resources earmarked for rescuing private banking companies should lead, if public opinion were well informed and judicious enough, to a legitimation crisis regarding the control of some of the biggest banking and financial institutions in the world on the part of their shareholders and managers. Assuming (but not agreeing) that privately managing the groups which the destiny of the world economy depends on is better, that privilege should be legitimized by their sense of responsibility and sanctioned by their failure. Nothing of that. Privilege and nothing else.

The question has been raised, in commenting on the Geithner plan, by Paul Krugman (NYT, 2009) in these terms: “by using taxpayer funds to subsidize the prices of toxic waste, the administration would shower benefits on everyone who made the mistake of buying the stuff… And this means that the government would have to lay out trillions of dollars to bring the financial system back to health, which would, in turn, both ensure a fierce public outcry and add to already serious concerns about the deficit… Officials still aren’t willing to face the facts. They don’t want to face up to the dire state of major financial institutions because it’s very hard to rescue an essentially insolvent bank without, at least temporarily, taking it over. And temporary nationalization is still, apparently, considered unthinkable”.

Joseph Stiglitz (Der Spiegel, 2009) adds: “What the Obama administration is doing is worse than a nationalization: it is pseudo-capitalism, which privatizes the profits and socializes the losses. It is a partnership in which one partner robs the other. Such a partnership, whose control is in private hands, produces perverse stimuli, even worse than those that brought us to the present chaos... [The Geithner plan] has allowed the Obama administration to not go back to Congress and ask for the money necessary to rescue our banks, and has thus offered a way to avoid nationalization”.

The reflection on property (that is, on the power to make use of resources) has just started and could widen and consider other solutions, going beyond the peremptory alternative between private property or nationalization. One could take inspiration from several models, depending on the situations, the goals and the size of the interventions. I am thinking, for example, of the success of the multinational Agencies and Consortia through which a modest amount of public resources is sufficient to mobilize, thanks to the credibility of the European Union and to its process of selecting projects, significant private resources; of the fortunate spreading, in particular in Italy and France, of forms of cooperative-enterprise property, not only in the production and consumption fields, but also in retail banking and insurances; of the Italian experience of Bank Foundations, which offered to some of the biggest banking institutions stable prime share-holders, able to balance the short-term objectives of the markets with the long-term objectives of the territories; of the interaction projects between Foundations, Sovereign Funds and financial institutions like the Italian Cassa Depositi e Prestiti under study in France and Germany. And I also think that those new kinds of property could allow a first implementation of James Meade's Agathotopia, contemplating the issuing of a “citizenship dividend” that would represent the return on the investment made in rescuing the banks (an investment charged primarily to the weaker population layers, either if the bill will be paid through taxes or if it will be paid through inflation).

The mother of all these crises is the governance crisis or rather the crisis of “the many governance centers that do not make one government of the global economy” (Stiglitz, 2006). The decision to put the problems aroused by the crisis on the G20 agenda constitutes a significant progress in passing from the American supremacy to international cooperation. We shall not forget that the Bretton Woods Conference was in actual fact a G2 between Keynes, for the exiting superpower, and White, for the entering one. The rebalancing of weights between the different areas of the world, occurred from 1944 to the present day, makes us believe that a similar passing of the baton from the dollar to the yuan is to be ruled out, and that, instead, there is to devise more balanced, agreed to, thoughtful solutions, even with regard to the needs of the developing world, and applicable, at least potentially, to the entire world.

There is therefore to give an emblematic prominence to an event that has been instead neglected by the media. Last June 23 the UN Conference on the World Financial and Economic Crisis and Its Impact on Development took place in New York. An agreement was reached on the causes of the crisis and on why it is having such a terribly negative impact on the developing countries. Some measures have also been outlined that should be taken into consideration and a working group has been formed to find out new possibilities of intervention. Stiglitz himself, President of the Commission of experts appointed by the President of the UN General Assembly to prepare the Conference, has summed up the main innovations in the UN approach compared to the G20's (Project Syndicate, 2009):

“… The UN showed that decision-making needn’t be restricted to a self-selected club, lacking political legitimacy, and largely dominated by those who had considerable responsibility for the crisis in the first place… The most sensitive issue touched upon by the UN conference – too sensitive to be discussed at the G-20 – was the reform of the global reserve system. The build-up of reserves contributes to global imbalances and insufficient global aggregate demand, as countries put aside hundreds of billions of dollars as a precaution against global volatility. Not surprisingly, America, which benefits by getting trillions of dollars of loans from developing countries – now at almost no interest – was not enthusiastic about the discussion. But, whether the US likes it or not, the dollar reserve system is fraying; the question is only whether we move from the current system to an alternative in a haphazard way, or in a more careful and structured way. Those with large amounts of reserves know that holding dollars is a bad deal: no or low return and a high risk of inflation or currency depreciation, either of which would diminish their holdings’ real value. On the last day of the conference, as America was expressing its reservations about even discussing at the UN this issue which affects all countries’ well being, China was once again reiterating that the time had come to begin working on a global reserve currency. Since a country’s currency can be a reserve currency only if others are willing to accept it as such, time may be running out for the dollar ... The US and other advanced industrial countries pushed globalization. But this crisis has shown that they have not managed globalization as well as they should have. If globalization is to work for everyone, decisions about how to manage it must be made in a democratic and inclusive manner – with the participation of both the perpetrators and the victims of the mistakes. The UN, notwithstanding all of its flaws, is the one inclusive international institution…”.

On September 2009, also the United Nations Conference on Trade and Development issued a report calling for a Global Reserve Bank with the power to issue its own currency, to monitor its members' national exchange rates, and to prop up or push down their currencies.

I am sure, however, that Stiglitz himself, should he take off his UN garments, would not have any difficulty to admit that the General Assembly's Conference was in a position to tackle issues excluded at the G20 for the simple reason that, unfortunately, it is deprived of effective powers. The only UN body with decision-making powers, the Security Council, is not indeed an example of democracy. That is why we must acknowledge the progress represented by the choice to address the crisis in a wider and more representative venue like the G20, whereas I believe that a great project to strengthen and democratize the UN is to be put on the agenda if we want to be capable of facing the new distressing global problems. The initiative could be taken up by the Sleeping Beauty, the European Union, which represents the laboratory experimenting how to regulate and govern the international economy, and a point of reference for whoever poses himself the problem of how to govern globalization. But which Prince, or federator, will come and kiss her?