Nice to see some sensible replies here amongst the “mob view”.
What some miss is the Government’s (in my view) blatant attempt to deflect blame to the “naughty bankers”. Its not just the British Government doing this at the moment but all Governments. First of all Brown seemed to be trying to avoid blame for his party by rousing up the “anti foreign workers” mob. He later seemed to realise the risk in that, so turned on the bankers, a much easier and obvious target.
The basic reason we are in troubled is the unparalleled credit expansion bursting as correctly stated. This enormous expansion was happily presided over by our Government and regulators. I remember Mr Blair and some of his colleagues with their exceedingly large mortgages taking full advantage of the “reckless lending”.
They chose not to regulate or reign in the massive wholsale market expansion. Much of this was via highly leveraged credit products held by a large number of hedge funds who are indirectly funded by banks. Banks created “toxic product” and lent money to hedge funds to buy it. We have had years of asset securitisation which has certainly not been kept secret.
Now we have to suffer a period of asset deflation. “Balance sheet recession” this will hopefully end when we get coordinated international spending programs to “force” money to circulate again. (may take some years :( The credit crunch in the banking system is just the begining. Solving that is a necessary first step but it wont restart the economy. The first thing people/companies will do when they get cash is pay back debt. Thats why tax cuts wont work, and the only way out is the hard way, and thats spending. Unfortunately in the UK we are very adverse to public works and cynical so it will be hard to get our programme going.
As hinted at before the problems started in wholesale markets(Iceland is the extreme case here). The domestic market collapse was a secondary effect from the collapse in wholesale) as domestics use it for funding.. sorry to go on so much!!
Posted 15 years ago
