Guardian UK: I've watched the economy for 30 years. Now I'm truly scared.

[marmar]

I've watched the economy for 30 years. Now I'm truly scared.
Will Hutton
The Observer, Sunday September 28 2008



If more people understood what has happened in the British and American banking system, the financial crisis would only be containable by the immediate partial nationalisation of every bank in Britain and America. There was not a run on the banks by depositors queuing in the streets to withdraw their savings. Rather, it was an escalating and terrifying run on the banks in effect by themselves, which, if it spread to millions of small savers, would reproduce the events of 1929.

In Britain, the money markets that the banks organise between themselves completely froze. Such was the break down in trust and sense of panic that some of the most familiar names in British high street banking would not lend to each other at all or, at best, just overnight. Instead, the Bank of England had to supply tens of billions to banks who found the normal sources of funds blocked.

I have been writing on the financial markets for nearly 30 years. I have known the system was becoming increasingly fragile, but for all the ferocity of my criticisms, I never expected the scale of today's events. Or that I would begin to wonder whether my own bank would survive without nationalisation. The negotiations in Washington over this weekend to finalise the $700bn Paulson financial bail-out plan, and the expected vote on Sunday, are all that stands between the Anglo-American banking system and a first-order disaster. The scheme had better work.

This is not the end of capitalism, as some wildly claim; there is no intellectual, social or political challenge to a market system based on respect for private property rights, even by the Chinese Communist party. Rather, it is a crisis of a particular capitalism that has set aside respect for trust, integrity and fairness as fuddy-duddy obstacles to 'wealth generation'. What we are relearning is that without trust and fairness, capitalism risks its own sustainability, even while it unleashes forces that undermine those self-same values. London's money markets froze because of a trust collapse; banks simply don't believe each other when they say their businesses are sound and will not default on their obligations. Trust matters. ......(more)

The complete piece is at: http://www.guardian.co.uk/commentisfree/2008/sep/28/globaleconomy.creditcrunch

[RUMMYisFROSTED]

1. Fuddy-Duddyism.

Works for me.

[Waiting For Everyman]

2. All this generates is empty bubbles. Why pay for it? Void it.

Paying for it only makes the heist successful. And who cares if all the banks are nationalized? That would probably be a good thing. Probably a necessary thing, to keep them from skinning everybody, which is all they do.

The article writer agrees with that farther on. IMO Banks should've always been national from the gitgo anyway.

There is this myth that competition lowers prices; actually cutting out the middle man lowers prices. Any service for the public good should be that way... whether it's banking, health care, education, whatever. Our states used to own the state universities until they were privatized - and tuition used to be very low to in-state students. Did the price after privatizing drop or explode? Well, now, it takes going into indentured servitude to the banks to pay for it. And that's how we're supposed to continually retrain so that we can have a global economy and continually give away the jobs we create? Bullshit. This all needs turning around and fast.

[EC]

3. If this is all that is learned the system is screwed

What we are relearning is that without trust and fairness, capitalism risks its own sustainability, even while it unleashes forces that undermine those self-same values. London's money markets froze because of a trust collapse; banks simply don't believe each other when they say their businesses are sound and will not default on their obligations. Trust matters. ......(more)

They've got to learn that there has to be substance, they can't just keep trading nothing for something...just because they apply a worth to it...

[tama]

4. Quote:

"Once again, left is coming to capitalisms' rescue".

Foolish sell-outs.