Cause and Effect, part 2. The Fallout

Because I know little about banking, and even less about worldwide financial interchange, I am a putting my thoughts on paper, in the hope that perhaps someone will elucidate. The question all of us are asking, possibly subconsciously, is where the hell has all the money gone? Perhaps like foreign aid to some of the African countries, it has been siphoned off to Swiss or similar secret banks, but surely not in the quantities we are talking about. I fail to understand why we, the taxpayer must provide the money for banks to actually lend to one another, which is what I’m being told on TV. If there was sufficient cash a few days ago, it surely isn’t, in fact, cash that they want, but it is cash that they are taking away from us.

We are told that the problem is across the world’s financial institutions as a result of them buying up promissory notes for properties throughout the world, and especially in parts of Europe and America, which in turn represent the value of properties, and the value of those properties is dropping, primarily because once there was trust between these institutions and banks, but when a few of them failed, panic spread like a virus and the whole system collapsed like a pack of cards. I believe it has been universally accepted that part of the cause has been as a result of what can only be referred to as a response to a mindless dealing by the finance houses for short-term profit. The overall problem as I see it, put simplistically, is that if I buy a second-hand Rolls-Royce I can hardly afford, at a price in excess of its value, and then try to resell it, I’m going to lose money, but surely I am not so stupid as to buy at a price that includes the value of my house, my assets and my income. So if I lose a packet on the deal, I may have lost some of my assets, but surely not all, and I will still have my income. In other words it is a matter of scale, and bearing in mind that the assets that these people bought still have a value, because throughout the world, there is a shortage of accommodation, and they surely are also trading at the same time in other commodities for which there is a market and a profit, I find it difficult in my simple way of understanding exactly what is going on. Can you imagine 700,1000,1000,1000 dollars even as a number, let alone as a value?

What I find equally surprising, if my assumption is correct concerning the actions and motives of those involved in the finance houses, is a that they are not being asked to repay the hundreds, thousands and millions that they received in bonuses and handshakes. If when all this mayhem started I immediately guessed the cause, I cannot believe that those within the industry including members of the civil service, did not realise what was happening could lead to disaster. After all, it didn’t happen overnight.

Is it purely panic that is responsible for the meltdown, or is there a serious underlying cause of some monumental scam, financial or political, that has wrecked the economy of so many countries, but not all? I notice that the markets are still functioning, people are still buying and selling, and rather like in the wild, there are hyenas circling the kill, only these are called ‘bargain hunters’.

Categorized as General

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