the demons of capitalism …

Unless you have retreated to a yurt in deepest Mongolia, it would have been difficult to miss the headlines of meltdown in the global financial markets in recent days. But, tucked in a corner of yesterday’s FT was a curious rallying call by David Cameron to not allow the ‘lefties’ to destroy capitalism by putting the blame of the recent crises on ‘this important part of the British and world economy’. Excuse me???

When Gordon Gecko espoused the virtue of greed in the 80’s, Wall Street was awash with city yuppies with fast cars, and faster incomes. Two decades later, it seems not much has changed – the financial instruments have evolved in technicality but the basic desire to get rich quick is more prevalent, albeit a little less transparent. Today, simple debts have been transmogrified into complex securities and bonds, to the point that no party in the food chain fully understands the risks … until it’s too late, when bad creditors default on mortgage payments and savers like you and me start withdrawing our hard earned cash from the banks, thus fueling a bank run like the one we witnessed on Northern Rock. But as someone observed, banks buy long and sell short – that is what a bank does – so when they to use funds from their retail business (our money, and ultimately our pensions) to gamble in complex products in the wider financial markets … AND lose, should we feel sorry when we see images on the telly of jobless bankers and their sad office boxes walking out of the building of a collapsed bank? I think not!

I suppose the irony of the Lloyds and HBOS merger is not lost on the ‘lefties’ either: in the golden days of capitalism, mergers were used to promote growth and now they are being used for reasons of survival, and in the case of HBOS, handed on a silver platter to Lloyds TSB with the full blessing of the UK government. Whilst I agree that administrations have a duty to maintain financial stability, I can’t help thinking that perhaps it may be worthwhile to do nothing, thus sinking the economy in order to teach banks a lesson in liquidity and risk management. The only problem is that the collateral damage in these sorry times are folks like you and me – people who would feel the pain from a greed we never subscribed to. And the medicine used by governments to cure this ailment? Oh, that will be taxpayers’ money too. Someone please explain to me how this is good …

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