Friday, September 23, 2011

Quick - send for Gordon. Or anyone who knows what they're doing



 Quick. Someone send for Gordon. What is signally lacking in this new and most dangerous phase of the Great Contraction is someone, anyone,  who seems to command the authority to get political leaders to focus on resolving the crisis.  In 2008, at the London G20, Gordon Brown banged heads together and got the international community to launch a co-ordinated multi-trillion dollar stimulus that prevented the recession becoming a depression.  There seems to be no one around with either the will or the vision to do this in 2011. Which is very unfortunate for the world.


     What is most striking about this latest twist to the financial crisis is that it is currently largely political rather than financial.  Yes, there are problems about Greek debt and deficits, and there is a great "deleveraging" taking place - that's a euphemism for paying debts.  But we should not be facing  the melt-down that followed the collapse of Lehman Brothers bank in 2008, when banks stopped lending to each other and world trade froze.   Most of the Western banks have either been nationalised or recapitalised.  There is economic restructuring certainly in countries like Britain with over-valued real estate and a bloated and parasitic financial "services" sector.  But apocalypse it isn't. 
  Germany has been an economic powerhouse of export led recovery.  Asia is growing faster than ever. Corporate profitability is high - or was before the banks stopped lending - and there is no shortage of capital around.  It's just that it is being hoarded by banks and companies because they have become gripped by fear.  Or rather fear of fear.  This is the moment when leadership becomes absolutely crucial to world events.  


As Jim O'Neil of Goldman Sachs put it to the BBC yesterday:  "The thing that really brought the world to a better place in 2008 was genuine collective action involving both the developed and the developing world through the G20"  Perhaps this sense of collective action will happen at this weekend's meeting of the G20 in Washington.  But I'm not holding my breath.  There is an ugly mood of economic nationalism sweeping through Europe - mainly focussed on the "sun-Med" states or the PIGS - Portugal Italy Greece and Spain.  People are fed up with bail outs and hand outs and constant .  Perhaps this is the moment the real crisis begins. 


10 comments:

cynicalHighlander said...

Gormless Gordon who stole taxpayers money to bail out PRIVATE corporate bankers to buy votes and a feeling of importance. If the banks had been allowed to fail, which they will do again, yes there would of been hardship but now the effects will be far worse than 1933.

The banks are insolvent and no matter how much fiat money they are allowed to print will never sort the systemic problem of consumerist capitalism.

Anonymous said...

"Or anyone who knows what they're doing"

Well that rules out Brown for a start. The G20's multi trillion dollar stimulus didn't save the world from depression, it simply delayed it a few years, and racked up trillions more of debt in the meantime. This idea that politicians can somehow magic economic growth at a time of impending recession is as laughable as it is when they claim credit for a boom.

An economy is a living, breathing thing. It has a life of its own, and chooses its path, almost at will. Politicians and central bankers like to think that they can exert some level of control by pulling levers and pushing buttons but in the end it is about real people doing real things.

Economic theory is really pretty straightforward. Take raw materials, use labour to add value and release capital in the form of profit. If you don't add value, you can't make a profit.

Printing money ain't the answer I'm afraid. It wasn't in 2008 and it isn't now.

george said...

Goldman Sachs ? One of the major players in causing the Depression ? And they're still wittering on about how they know all the answers. Hank Paulson left Goldman a multi millionaire to lead George Bush a merry go round. In charge of QE and transferring trillions into the banks to cover all their losses before getting out of dodge. Goldman will meet it's comeuppance for this scandal one day. That's a certainty.

Anonymous said...

'Or anyone who knows what they're doing'.

Why not send for John Swinney our very own Finance secretary.

He has the cv including a track record of balancing the scottish budget and making us feel good at the same time.

The question is 'Could Alex spare him?'.

Anonymous said...

I forgat to add:

'And on a fixed budget'.

Anonymous said...

"Quick - send for Gordon. Or anyone who knows what they're doing"

This no time for a nutter.

Anonymous said...

Quick - send for Bill Jamieson. Or anyone who knows what they're writing about!

Bob said...

One of the weirdest things about the depression is that most of the people who caused it are trusted to get us out of it.
Goldman Sachs are now sitting on a $48trillion derivatives ( re insurance) timebomb yet are asked for their views on how we should get out of the problem. I suspect their answers will be things that involve socialising the debts as usual.
And to see Ed Balls, Alastair Darling etc being given air time to spout nonsense is infuriating. They should be held on remand until we can get to the bottom of what they did to wreck Britain.

http://www.zerohedge.com/news/five-banks-account-96-250-trillion-outstanding-derivative-exposure-morgan-stanley-sitting-fx-de

The $250 trillion timebomb dwarfs Lehmans, AIG etc.

Duba_scot said...

Time for leadership...let me cast an idea across the trembling financial waters. It is straight forward, comes in two parts;
Part 1: All countries nationalise the "core" banks that will provide cover for the countries individuals and manufacturing base. This allows the investment banks to fold.
Part 2: UK,Germany, France, Italy, Spain start the sovereign debt forgiveness strategy. This has been said would reduce the debt owed between thes countries to 40% of today total. Frances debt would be less than 1% GDP.

Jump to it guys, let the bond holder weep. I won't be shedding any tears for them, and I suspect not many other will either.

Anonymous said...

Harold Lever, a minister in Harold Wilson's government in the sixties thought the Building societies were worth saving during another crisis of sterling, by offering them cheap loans.

As far as I am concerned we need to go back to the future, to the business model that enabled generations of ordinary citizens to own their own home.

And I would expect it to be a priority of a future fully devolved Holyrood parliament to make this happen.