Recession and bailout-weary countries are now starting to act on their own. Early on, there was talk of international coordination, but now that the worst of the crisis seems to have passed, it’s every man for himself.
The European Central Bank let Greece know in no uncertain terms—through an interview in an Italian newspaper—that if they sunk themselves with debt, no bailout would be coming.
In unrelated, and yet related, news, Japan’s finance minister decided that exports would revive their economy and declared the yen to be too high. After which it promptly dropped. The new finance minister took over the post yesterday from his predecessor, who had the exact opposite policy.
In more unrelated, and yet related, news, China’s central bank decided it needed to put the brakes on the economy and increased interest rates on treasury bills for the first time in this cycle.
Now, an international dog-eat-dog world is not really news. It’s more like the norm. Yet it will represent a sea change in the way things were handled throughout the crisis, where international cooperation and consultation was key. You can count on all sorts of crazy, unexpected things starting to happen again. Some of them may be possible to explain in hindsight, but no one will be able to consistently predict what will happen. When a finance minister in one of the world’s largest economies can do a 180 degree policy shift in his first interview, you never know what else might be coming. For some reason, this “new normal” looks a lot like the old normal.
In the absence of being able to predict what might be coming—don’t even waste your time—it might make sense to use a more tactical approach that allows you to react to the changes as they occur.
