The Financial Tower of Babel, Economic Strategies

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In the Bible, people began to create a Tower that was to be a materialistic

ladder to Heaven. The Tower crumbled when the communication mechanisms

of finance were lost. In the last twenty years the global economy has undergone

enormous economic growth. Europe and North America, created a consumer

based, materialist Tower Babel made of debt and excessive leverage. This Tower

collapsed as confidence in the language of the financial world (debt, securitization,

leverage and antidotes trust, liquidity and interbank lending) collapsed.

Although the latest crisis appears to originate in the financial sector, the

origins are much deeper. Capitalism and the relentless search for competitive

advantage, has resulted in huge volumes and variety of goods and services.

Demand has to keep pace with supply, which marketers seem to understand, but

economists have ignored. Over the last twenty years, the manic search by firms for

competitive advantage has been most marked in the speculative mentality of the

financial sector, creating Towers of debt based on speculation.

The recent Tower of Babel, like the archetypal one, was built on illusory

foundations of symbols, or building blocks of assets that had value only so long

as people continued to deceive themselves that they had value. It was bound

to collapse at some time; the critical point occurring when the language of

communication broke down. The builders, suppliers and managers of the Tower

eventually ceased to communicate because they no longer believed the assets of

their trade, debt and liquidity have any real value.

But there are a positive effects, which may be dormant within the

complexity of the global financial network. They arise from its complexity and

independence. Perhaps we should understand the collapse of the modern Financial

Tower of Babel as signalling a critical point, opening up the possible emergence

of new languages and new understanding of dimensions of Being that include, as

well as the necessary game of increasing wealth (and as Keynes pointed out in

relation to the depression of the 1930’s, the game need not be played for such high

stakes, and with such inequity, as in the building of the Financial Tower of Babel),

dimensions of soul and spirit.

In 2011, the situation was largely influenced by positive news from the

world’s top-performing economies and from commodity markets. The leaders

of the global economy made every effort to mitigate consequences of the crisis

in the corporate segment by purchasing toxic assets and liberalizing monetary

policy. Such actions allowed for stabilizing corporate lending and, consequently,

supporting retail consumption.

For example, consumer spending in the USA, which accounts for about 70%

of the national economy, increased by 2.1%, having become the major source of

GDP growth in 2011. Trade deficit was also decreasing. The Eurozone, in turn,

supported economic growth with positive GDP changes (by approximately 2%,

annualized), industrial production growth (by 0.6%), and flat unemployment rate

(10%).

All of the factors listed above positively affected the Russian market,

which managed to maintain domestic demand on the part of both consumers and

investors, despite a certain downturn in real disposable income of the population

(–1.4%) and a below-expectations GDP growth rate (3.6%, annualized, compared

to the previously expected 4.3%). The recovering lending market had a positive

impact on consumption and, as a result, the market showed a significant increase

in retail turnover (by 5.4% compared to the similar period of 2010). In addition,

starting from May 2011, the construction sector started growing faster, which also

contributed to GDP growth. All of this was supported by high prices for energy

resources.

However, as early as by the end of summer 2011, uncertainty about...
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