baldysblog.co.uk

I can make no claims to any great financial expertise in the area of Global Transactions but a simple question arises for me: “So what exactly is all the fuss about and from what is currently happening, what is the surprise ?”

Now I’m not deliberately trying to be flippant and ignoring what must be a very painful and chastening experience for many but my point is that there is absolutely nothing that is “New” about what is taking place, there are no “New Surprise Elements” that make this “Crash” historically unique and therefore “unexpected”. Capitalism, Socialism, it is all about the redistribution or transfer of wealth by various means and a Market Crash is just one of them.

During the 1980s

Completely by accident I ended up in the Life Assurance Industry during the 80′s and it was quite an amusing experience however I very early on decided to avoid the mortgage market whenever I could for the simple reason that even the most sensible people became ‘gibbering idiots’ when confronted with a new house purchase. It is this self same irrational behaviour that we have been witnessing for some years now right across the economy and across the globe.

That politicians will always try to claim some credit for the good times – “You’ve never had it so good” from Mac the Knife comes to mind but that pales into insignificance when set against Gordon Brown’s claim to have banished “Boom & Bust” in the British Economy, I bet he regrets that one ! I suppose if the crash hadn’t happened, by now he would be claiming that he could walk on water and turn water into wine as well.

The One Extraordinary Feature

In a ‘structural sense’ of what has happened there are no surprises: Global trade expanded at a phenomenal rate over a 10-15 year period which included the emergence of both India and China as major trading partners with the West with China in particular becoming the manufacturing centre of the whole World. The consequence was the world economy was awash with “cheap money” held by these countries who fed their trade surpluses back to the West which kept interest rates down artificially. Yep, that is the simple version and intended to be so !

But what is extraordinary during this period in the West was that instead of the “feeding frenzy” being restricted to consumers and the housing market, everyone joined in, Governments and Financial Institutions, there was not one restraining voice in the Parliaments, Chancelleries, Stock Markets and Boardrooms across the World, everyone was “out to lunch”.

To me it was obvious by 2003/4 that UK property prices were well and truly out of kilter with earnings and therefore long term viability. Wages were being kept down by criminally and deliberately inaccurate “official inflation figures” so that wages and average house prices were diverging at an alarming rate with lenders covering the gap with ever wilder “earnings multiples” and “self-certification”.

But in a sense, absolutely nothing about this changes a thing; you can bend the rules if you like, kick things into the long grass but inevitably, there comes a time when the ‘Piper must be paid’ , realities must be faced and which is where we are at today.

Time to Pay Up

The impact on jobs may be quite dramatic within the UK as the takeover by Lloyds of HBOS today demonstrates with eventual job losses projecting 20-40,000 with a ‘knock on’ effect from that in local economies. This pattern will repeat right across the West and at its worse, may mean a total restructuring of the World economy but then again, would that be such a bad thing ? Do we really need 4x4s, two foreign holidays a year and iPods or do we really need food, clothing and shelter + competent governance, communications and transport more ?

The ‘Pay Up’ will fortunately be quite correct and the Boards of failed enterprises and people like Gordon Brown and the Labour Party will be swept away into the oblivion they deserve for not serving their ‘owners’ interests properly be that the shareholders or taxpayers/electors.

The first boom and bust story I ever heard concerned the market in Tulip Bulbs, it seemed to me totally ridiculous that such a thing could happen in terms of “investor frenzy” but today is little different with junk bonds and junk manufactured goods. The good news is that we will all survive this “Bonfire of the Vanities” and hopefully start to move forward rather more sensibly.

Moving On

On an international level, some problems such as global warming and oil dependency should start to resolve themselves as supplier countries realise that their share of the ‘trade pot’ is shrinking too but I’m sure that the ice at the North Pole will continue to shrink for a time before it reverses itself and grows again as it is in the Antarctic and still no one will know whether global warming actually exists as described by the “doom sayers” or is part of a natural cycle.

With regard to an increase in legislation to control financial transactions, there is one thing you can guarantee, any new legislation would have solved today’s problems if they had been in place but will be totally useless for the next time it happens – horses, stable doors and bolted comes to mind.

Personally, I think a minor celebration and a picnic in the park would be more useful than listening to the boring prognostications of Nick Robinson, Robert Preston (retard), and all the other Muppets who need to pump up the drama to keep their jobs by seeming knowledgeable and important – total losers still going around a Merry-Go-Round that has stopped !