February 12, 2009

Sorry is not enough

Filed under: Economy, Politics/News — Tags: , , — 4fooey @ 11:00 am

This week we got apologies from all the UK bankers who were, to a greater or lesser extent, responsible for the collapse of British banking. But what exactly are they apologising for? If they feel they have something to apologise for, then they must feel that somehow they have made some mistakes and they are to blame for the mess we’re in. In this case, they should be punished or sanctioned in some way: they should be held to account for their actions. In this case, sorry (how ever many times they say it) is not good enough. Their collective apology is reported here: Former banking bosses say ‘sorry’ .

It was relatively easy for the bank managers to turn up this week and suffer the indignity of having to apologise (and their apologies seemed well rehearsed), but they personally will be able to keep all the millions that they made in salaries and bonuses — and you could ask where are all the billions of profit these companies have made over the past few years. The banks have really screwed up and it’s taxpayers who had to bail them out and will be paying for years for their mistakes — this is very unfair. And to cap it all, it turns out that Mr Hornby, the former boss of HBOS, is still getting £60k a month for his advice – this is a scandal, bearing in mind we all more-or-less own the bank.

Yes the regulators and the government are also to blame for the bank crisis, plus we were all complicit in the credit boom and housing bubble, and the UK banks were partly victims of the worldwide problems in financial markets (in particular the sub-prime scandel in the US), but it’s the actions of these large financial institutions and in particular their executives that got us into this terrible mess. I’m not sure how this could be done, but the banks and their leaders should be made to pay for their mistakes.


October 16, 2008

The big adjustment

Filed under: Economy, Environment, Politics/News — Tags: , — 4fooey @ 10:10 am

Is this the end of life as we know it? Well, I doubt it, but with the ongoing financial crisis, and now the real threat of global recession, it seems that life for many millions will get tough (of course we’re talking about people in the western world, since there are many millions who have it pretty tough already). Many people are predicting a quite severe recession, that will probably last for a number of years, although most pundits don’t really know how bad it’s going to be. Chances are, most of us will get through it, one way or another, but I’m sure we will all have to make changes in our lives, to a greater or lesser extent.

Looking at the situation more broadly, however, this financial crisis or near meltdown, may be a manifestation of wider problems in our economies and our western society as a whole. Our whole way of life and levels of consumption have reached a level that relies on too many assumptions: relatively cheap and plentiful resources (fossil fuels & raw materials), relatively cheap and plentiful supply of food, as well as labour, and easy money/credit. Now though these assumptions have shown themselves to be completely unsustainable, as some resources become more scarce or expensive. Confidence in the whole system has broken down.

Consider the scale of the help given to the financial industry — it runs into the trillions of dollars, in the US and Europe, and we are told there are many ‘toxic assets’ that are hidden away that will probably need to be written off. We are told this help is necessry because the banking world is so central to the running of our economies. Imagine if we could spend a fraction of this on solving some of the other problems in the world, such as climate change, finding alternative energies, helping the developing world to fight disease, providing education, etc.

In the west we live in a kind of virtual dream world of relative luxury, that is supported by the media and advertising. This illusion has become shattered with the current financial crisis — consumer confidence has been hit by the crisis. A similar thing happened when the planes smashed into the Twin Towers in New York back in 2001 — immediately following the event people were traumatised and for a short while ‘normal life’ was suspended, while people stopped shopping and several websites were closed down. A blast of reality had shocked people into realising what really mattered to them — somehow they were turned off the merry-go-round of modern consumerist life. Soon after the attacks, President Bush told everyone to go shopping to get everything back to normal!

We really can’t go on living as we do, expecting our economies to carry on growing — we should aim for a good standard of living for the majority of people in the world. This financial crisis and impending recession gives us an opportunity to re-assess how we conduct our economies and lives as a whole. I’m sure the main thrust of how governments and individuals react to this will be “how do we get back to normal”, but I feel a more radical adjustment is needed — the changes needed to reach a fairer and more sustainable system are so huge it almost seems impossible to achieve. However, with the right leadership, with all the clever brains working on it, and with hope and optimism it could be possible.

Update 23/10/08; just read a good article by one “clever brain”, namely Jeffrey Sachs, writing in the Guardian: Amid the rubble of global finance, a blueprint for Bretton Woods II. He suggests that the leaders of the world should go much further than ‘just’ fixing the world economy by trying to roll climate change, poverty alleviation, and so on, into a grand ‘new deal’ — great idea, and I hope they really can pull it off, if indeed they try to do this. A similar line is taking by another “wise man” Jonathan Porritt in his article: Zero hour for a new capitalism. He sees economic and environmental issues as totally interelated, which of course they are, on a global level.

October 13, 2008

Mr Brown saves the world (no less)

Filed under: Economy, Politics/News — Tags: , — 4fooey @ 9:19 pm

Last week the UK government announced measures that will inject billions of pounds into British banks and guarentee lending between banks — it seems odd to most people that we, taxpayers, have to fork out so much cash to save banks, which afterall are commercial organisations which are ordinarily run for shareholder benefit. Aside from the rights and wrongs of rescuing the banks, and how we got into this mess in the first place, it seems that a rescue package is desperately needed — towards the end of last week stock markets were tumbling, severe economic depression was being predicted, and nobody really appeared to have a grip on this situation. The UK plan has gone through today — so not such a ‘Black Monday’ (except for the bank’s directors, poor souls!).

However it seems that with the UK’s rescue package, put together by UK PM Gordon Brown and Chancellor Darling, that we have all been saved, and now many other governments in Europe, and in the US, are doing the same. So let’s hope the British public can feel proud of their Prime Minister, and proud that it was a British plan that saved the day. It often takes an outsider to recognise success and give praise when it is due, so it was that economist Paul Krugman of Princetown Univ and columnist for the New York Times was overflowing with praise for Mr Brown. His comments are reported in the New York Times today: Gordon Does Good (reg may be required).

To quote Paul Krugman: “the British government went straight to the heart of the problem — and moved to address it with stunning speed. On Wednesday, Mr. Brown’s officials announced a plan for major equity injections into British banks, backed up by guarantees on bank debt that should get lending among banks, a crucial part of the financial mechanism, running again. And the first major commitment of funds will come on Monday — five days after the plan’s announcement.”

I still believe the banks were largely to blame for this crisis, but the regulators should take the next portion of blame. And it is government that should have been checking the regulator, in the UK this is the FSA. As well as the bankers, individuals should also take some of the responsibility for the crisis, since they fuelled the demand for more and more debt: according to Robert Peston today, the British people owe the equivalent of 3x the UK annual GDP which surely is unsustainable. So there’s plenty of people at fault here, but I guess while the whole ship kept afloat no-one wanted to complain. Today however, the British public should at least stop griping about their PM and give him some credit for once.

October 8, 2008

Borrowed, Binged, Busted

Filed under: Economy, Politics/News — Tags: , , — 4fooey @ 10:03 pm

The scale of the rescue package for the UK financial system is unbelievable. The total package is said to be worth around £500 billion — this is a phenomenal amount of money by any measure. You can argue about the details of the deal, or you may have an opinion about whether or not it should happen, but we are told we need to do this now to save the economy — it’s as blunt as that. So how did we get here?

For too long, our whole society has been living beyond its means, not just in Britain, but across the world, mainly in the Western developed world. As a whole, we borrow too much, we over stretch our finances too far, we buy too much, we consume too much. Aside from the obvious excesses you see from some people, such as gas guzzling vehicles, extravagent lifestyles, luxury goods, etc, the whole way of life in the west, for more or less every individual, is based on the over consumption of resources and energy. To support this lifestyle, we have borrowed too much, both as individuals and governments. For too long we have binged on credit, on easy money, and binged on the trappings of our modern lifstyle. The financial crisis is not something abstract that is happening in the banks, behind closed doors, or on stock markets, it is the manifestation of our bankrupt and unsustainable western way of life. And now it is thoroughly busted. To cap this, the government solution is to borrow ever greater sums of money to bail-out the system (yeah we haven’t got the £500 billion) — piling debt upon debt — in the end we all pay for this.

Many people think this crisis will get a lot worse, but surely at some point things will get better. So how do we get out of this mess? We have to go back to basics. With a good measure of common sense, we will have to change our lifestyles, live on less, use technology and innovation to help us — we need to create things of real value. We need a system that is sustainable, that uses resources wisely, one that is built in the service of people, all people, and future generations. Fine words, but after this crisis, it could be done, if we have the will.

October 6, 2008

The elephant in the room…

Filed under: Economy, Politics/News — 4fooey @ 10:36 am

…is YOU! That’s right, the real problem in the financial crisis is YOU. But rest assured it’s not just you (you alone are not strictly to blame, of course…), but it’s you, me, and the next man or woman, and probably his/her dog, since we in the western world (and even our dogs) are all “consumers” — and the word consumer is a very apt one for what we are. On one level we buy food, clothing and a roof over our heads in order to live, but as western “consumers” it’s much more than that. We buy or consume vast quantities of food, clothing and other consumer goods (along with the energy and resources required to make or supply these things), well beyond our immediate subsistence needs. It’s blithely called our “standard of living” and we in the west have come to expect a very, so-called, high standard of living — and this is what’s crippling us and the planet, and this insatiable need to consume has fuelled the current crisis in the banking system, bringing it to its knees (aside from the obvious greed of some bankers). The whole banking system, with mortgages, loans, credit, etc, has evolved to support our current way of life. Now the banking crisis looks set to impact on the real economy, which is where the real damage will be done, and people’s lives will suffer.

Everyone is discussing how we respond to this situation, and it seems that in the short time solutions need to be urgently found — the assumption also appears to be that when the storm has passed we can all return to normal, resume our standard of living as before. But everyone is ignoring the fact that we cannot, if we are to avoid disaster — the longer term solutions will mean dramatic changes to our lifestyles and the whole way we run the world economy.

So that’s why you, me and everyone else are a big part of the problem in the current crisis, and that’s why we are going to have to be a big part of the solution. I don’t hear people saying: “We spent too much. We bought too much stuff. We borrowed too much. We should have been more careful.” People I talk to are worried mostly about losing their savings (of course you would, especially if you’ve been prudent and saved), but no-one seems to connect themselves with the problem — of living (and borrowing) beyond your means, to a lesser or greater extent — blame is always somewhere else. 

It is clear however that we do not have a sustainable money system/economy and way of life now (it’s clearly busted), but how we get to one that is, is the real problem?

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