Sub prime steak

Just thought I’d weigh in on the ridiculously over-emphasised and boring topic that is the economic crisis.

It’s difficult to understand the logic that led to an enormous economic downturn. Of course, it was primarily driven by greed, and the need to constantly up the risk factor in order to reap the rewards. I know very little about economics. What I do know, is that the banks’ strategies were always madness. New Labour further encouraged this culture of high risk lending, partly because City Boys have been in and out of Downing Street for 10 years, on the basis of donations, but partly because they believed that this was one area of industry which might just work, no questions asked, without regulation.

I am loathe to delve into specifics here. While there are a myriad of reasons and theories about why the economy went belly up, (sub prime market lending and endless amounts of other financial jargon) as I’ve already mentioned, it was all inevitably caused by increasing greed. I have a bone to pick with building societies that turned into banks too. The behaviour of banks is now to lend more than their asset base. HBOS changed the business model from an old-fashioned, slightly boring banker who gave you some money and then lent some money to someone who might pay it back, to someone who decided that leverage was a cool-sounding word and borrow several times what the bank owned, then lend it to anyone!

When there was a remarkable shift from the slightly jaunty, thrifty “credit crunch” to a more serious economic downturn in September 2008, Gordon Brown said “I’ve been worried about this for a long time”. REALLY? Which British politician opened the Lehman Brothers building in the City in 2004, saying: “Lehman Brothers is a great company. Let me thank you for the privilege of being here, I look forward to its future” It was Gordon Brown. That’s what happens when you are complacent in the face of recklessness and greed, and you don’t realise that markets are not moral, they’re amoral, that’s why you regulate them. What’s so stunning here is that I’m no economist, yet I am flabbergasted at the ridiculous nature of the situation. One can’t punish the banks too heavily, because after all, it’s our money that they rely on. The Catch 22 is that we need them as much as they need us, thereby to a certain extent they can afford to do what they want.

Still, it’s not the end of the universe just yet.


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