Thank you Stoner for your eloquent explanations. Perhaps a few on this forum have now been educated beyond what the tabloid writers would have us all believe.
So, what did the Banks do wrong? Well, in essence, they were trading debt as if it were an asset. This was good for them. It made them look rich and strong and inflated their value so they could grow and grow, eating up smaller Banks as they went. Successive governments were delighted by this. Profitable Banks boosted the economy. They generated lots of income for HMG in the form of various taxes. They employed lots of people, all of whom were paying income tax. Unemployment numbers were reduced, minimising benefits. And of course we were all happy to go along with this. We all wanted a share in the dream.. Hell, how easy was it to get rich? All you had to do was buy a crappy flat somewhere, paint it, put up some nice curtains, and suddenly you were a property developer.
Did the Banks cause the recession? Well, probably yes. But it was all set off by a general slowdown anyway. As soon as there was any doubt around, those “assets” in the form of traded debt suddenly looked a bit thin. And so the whole house of cards came crashing down on a massive lack of confidence.
So, where did all the money go? Well, there aren’t thousand of bankers going around with a split of the £900Bn UK debt shared amongst them. Mostly it never existed in the first place. We were all just happy to spend beyond our means, happy to turn a blind eye to the fact that we weren’t really earning it. From those at the top who were (and still are) happy to cream off what they can, to those at the bottom, who were (and still are) happy to believe that they can live on state handouts and/or a massive public sector. Councils, corporations, Quangos and governments all living beyond their means on the never-never, and all of us complicit in the convenient lie.
