The cause of the finanical crisis revealed!

A good number of years ago I had a not very demanding job in a land very far from home. My employer wasn’t doing great things for me and the young lady I was interested in at the time wasn’t interested in me. She did think I was quite lovely though. So I created a fantasy job, a diversionary daydream if you will. It was of the road not taken variety. In contrast to the road I was on which was well and truly of the dead end variety.

It evolved from a series of aptitude tests I and others had done for a company in the final year of college. The results had been incredibly, perhaps some might say even freakishly positive for me. There again it was very reassuring at the end of my time to discover that yes engineering was for me! As for the daydream position I would have magically acquired it upon leaving college by means of similarly interesting aptitude tests and other probing physical examinations that would have revealed my undoubted brilliance and suitability for the role.

The job started out being somewhat vague as these things tend to do in daydreams. It did involve a very nice office based in the IFSC if I recall and such excitements as a PA and a well appointed apartment. I was on a promise that I was to be extensively trained in many interesting skills, foreign languages, how to handle the media, high finance, fighting skills and so forth. It was a daydream after all, and I wanted to leave it open enough that some spying/espionage might be involved. To assist me with achievement of all this I had access to many quite peculiar and very futuristic looking pieces of technology that seemed quite out of this world. As is my wont with any such fantasy I create, I came quickly to undermine it by introducing various unsettling and disturbing elements. The excessive secrecy about my eventual role in the organisation, the origins of the top people, the disappearance of colleagues or indeed what it was the company actually did.

Later on in the daydream, (which at this stage was evolving into proper movie serial mode) I was to find after a number of worrying signs and interesting scraps that in my superior’s office was a hidden cupboard which in fact contained a teleportation device. This chamber brought me to a very substantial but largely unmanned spaceship in orbit around the earth. Yep, we were firmly back in my usual comfort zone of sci-fi territory. I snooped about the ship as one does in these things and discovered that the organisation was seeking to become the overlords of the Earth. This they would do by taking control of our financial system and by extension our political system and petitioning for the Earth’s entry into a galactic trading system whereby they would be recognised as de jure and de facto Rulers of the Earth. I’m not 100% sure that the R and E were capitalised in the fantasy but they seem sort of appropriate now. This state of affairs once ratified by the galactic authorities could not be overturned and would be enforced by the other worlds.

It was in some sense all in the best traditions of Western European colonisation - a West Spiral Arm Trading Company if you will. I was to be one of the front men (my tests had revealed a certain detachment from my fellow man, well I did say at the outset that I didn’t much like my job and so I was of a mood to feel a tad disconnected) as they declared to the leaders of the world that they had, in the parlance of the times, the financial system by the balls and having brought it to the brink of collapse they could cast our world into the abyss.

They had over the last few centuries progressively invested in those new technologies that they knew from the experience of other similar worlds would ultimately succeed over the long run. They had gotten their initial seed capital from their superior mineral assaying abilities which had given them local mineral wealth and then they had simply waited for humanity to discover the obvious to them scientific advances, with the very occasional nudge, that they could invest in and turn into even more wealth and influence. After all, transporting millions of troops across space is a very expensive way to take control of a world. If your lifespan can be measured in centuries why not just find a world that is close to making the jump to space travel and simply entangle yourself in its affairs such that its ascent becomes the engine for your own wealth.

They had completely embedded themselves in the stock market and the global financial system. Just at the point that I had been hired they were finally in position to leverage their position in the financial system such that they could readily collapse the world’s economy if our leaders decided to choose incorrectly.

Now, let’s get back to the beginning here. This was just a wish fulfilment exercise on the part of someone with a not too demanding job and too much time on his hands. Right?

I mean I was just daydreaming; not exhibiting pre-cognitive abilities like my auntie Mary had...

Where did all the money go?

At this point, we all know that people in the financial sector (I think the technical term is fecking eejits) paid over the odds for assets that we now refer to as toxic. But where has that money gone? After all, if people paid excessive amounts for their stinky soggy ex-hot potato parcel and that parcel isn't worth what the buyer thought then at least the seller has the cash right? right?

The core issue we are being repeatedly told is that loans were given to people to buy their homes and these are people who can't now afford to make the repayments. Yet it is worth remembering that not all of those people will default and even those that can't make loan repayments will be able to pay rent which has to be worth something more than nothing.

In part I suspect that by painting the situation as bleak as possible serves to allows some people who are directly responsible for this way of doing business to pretend that there was nothing they could have done differently. That this is, in words all too familiar to users of the Irish health service, a system's failure. It's not, it's a failure directly attributable to those same individuals who were collecting the bonuses for how great they were doing. Those who made the decisions should be fired.

EU is none too pleased at how the Irish government acted - Sod'em!

Well, would you get her?
The EU seems miffed that the Irish government acted what they view as a unilateral manner to deal with the situation in Ireland vis-a-vis the banks. I've personally got a lot of qualms about the way in which the government's underwriting of the banks had been handled but one thing I don't have a problem with is that they didn't wait around for the EU to have a conflab about it. As McCreevy pointed out later on member states don't have the luxury of waiting forever and a day while Brussels ponders. In truth I sense the hand of McCreevy in all this, he was in Ireland on Monday and I suspect he was consulted at least to some extent on the options.

Rumours and innuendo

Last week the word was put out about the state of a major bank with the intention of impacting its share price. Yet one week on there has been no announcement of any investigation into improper conduct by those spreading the rumours.

The bank I'm referring to isn't HBOS or Anglo-Irish Bank, it is Bear Stearns. Bear Stearns was telling everyone who would listen that it was fine, just dandy, nothing at all to see here and there was no reason for anyone to worry their silly little heads about when it came to its ability to continue to do business in the future. Yet in the matter of a few days, it has been subsumed in JP Morgan Chase. So I guess the lesson is when the institution itself tells fibs that's ok, if someone else does it that is wrong.

Unemployed black man or employed white graduate - who is to blame for the credit crunch?

The two Johns have tackled the issue of the sub prime market already (see the clip below) but I believe the real problem isn't the unemployed black man in a vest sitting outside a house he can no longer afford, it's the college educated white 20 and 30 somethings who is up to their eyes in credit card and college loan debt.



At the heart of the credit problem is a significant percentage of people mostly white college educated folks who had large sums of money made available to them which they gladly borrowed and spent it on pure frippery, and of course spring break! Average credit debt in the US for those graduates in the 20s is nearly $6,000. And that is just credit card debt, most US graduates have college loans into the 10s of thousands. Now the solution being offered by the Fed is yet more cheap credit which will lead to more spending on frippery (most of it coming from Asian economies rather than the US).

Is there some hope that those being lent to would act to re-finance their credit card debt into loans and take the time to pay down their debts? The problem is that the servicing of the credit card debt is much more profitable to the banks and they are disinclined to alter the terms to medium term loans. This is the time to turn into the tidal wave of financial mismanagement but I suspect most will take the short term option and just spend again.