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Thank You, America

This is probably never going to gain traction, but I wonder whether we should really be thanking the US for triggering the financial crisis...

My reason for saying this is that, at least by doing so, they called a halt to the process of adding to the ever-growing pile of debt, both good and bad, before it became even more unsustainable.  If the whole edifice had been able to carry on throughout 2008, 9 and 10, just think how much more of a mess it would have been to clear up then.  At least by triggering it now, we have a smaller problem, even though the sheer scale of what we are dealing with now makes the mind boggle.

Of course, the US played its part in bringing this all about, and they should rightly take their share of the blame for that.  However, although HMG likes to blame it all on the US, the Americans didn't lend money to uncreditworthy people in the UK, or encourage people to use their houses like glorified ATMs.  Neither did they promote the view that the good times would go on for ever, as HMG did with their promises of endless bounty (i.e. end of the bust) and thus encourage people in the belief that they could go on borrowing more and more to fuel a lifestyle that was in reality beyond their earning capacity.  They didn't even create a regulatory regime that enabled our banks to take on liabilities that are 3-4 times the size of our annual economic output, much of which was 'invested' in instruments, the contents of which were of dubious provenance, to say the least.  WE did that...

I know this will never be fashionable, but I for one am about as relieved as you can sensibly be at this point that someone called time on it all.  I only wish that we had collectively had the sense to see that the age of debt would never work, and made sure we didn't bring it on in the first instance.

What we need now is a set of sensible policies to get us out of it, and a series of actions that spring from a collective sense of responsibility.  To do that requires a) a proper assessment of the real problems and b) a sharing of the pain.  I don't see either at this point, unfortunately.


Comments: (2)

John Dring
John Dring - Intel Network Services - Swindon 28 January, 2009, 13:12Be the first to give this comment the thumbs up 0 likes

Yes, but WHERE did the money go?

I am still trying to fathom that one.  Its not just that the value of stocks has since plummetted (all our funds lost their value too as a result, and if you were an actual shareholder, then you are now looking at a loss), or that house prices have dropped 20%, but that the money that was supposedly slushing about the system and burning great holes in the banks' pockets, is simply not there any more.

Where did it do?  Is it now all in gold and US stocks (hence the strength of the $) or under the mattresses of corporations?  It's obviously not in the actual banks or we would not have bailed them out twice already.  i.e. was it all paper money and not real at all - banks were lending to other banks lending to others, lending to you and I and taking commission and payment every step of the way.  So over the past decade, I suggest that the actual 'money' has simply been paid out within the financial industry(bonuses etc) and spent.

Lets face it, if you were to look back in 100 years and consider what boom you could have invested in to make money, you might have considered the Telecoms sector over the past 20 years.  But no.  BT share price is less than when they floated in 1984.  Many others are similarly suffering.   The ONLY place that really boomed was the Financial Services sector... deregulation and computerisation of markets etc.   Here is where money made money, and where half of that has just been siphoned away under the noses of the experts.

It'll take years and could cause more than a retail hardship along the way.

A Finextra member
A Finextra member 29 January, 2009, 09:14Be the first to give this comment the thumbs up 0 likes

An opportunity to ensure that Social Justice replaces Consumerism at the heart of economic and financial models going forward?

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