A Christian Eye on Politics
A Day of Reckoning Must Eventually Come For Debt-Driven Economies
T here has been financial turmoil all over the world during the last few days. Many people are worried in case their life savings might be in jeopardy, others are worried about their jobs - indeed many jobs certainly will be in danger and, when the dust finally settles, many high-flying business types will find themselves without any means of income, having to see their expensive homes and cars go, having to radically change their affluent and high-flying lifestyle.
What has caused it all?
Dishonesty, exploitation and greed! Strangely enough the western financial system works quite well most of the time but it is based on confidence and optimism. When a good majority of those who are most closely-involved in the financial centres of our great cities are basically behaving in a fair and just manner (always seeking to make a profit, of course, but nevertheless mostly all 'above board,' fair, competitive and 'open'), things tend to work well. Even then 'boom and bust' are necessary parts of the expected cycle of things (and we are into the second of those right now), but where excessive greed, exploitation and unbridled speculation start to overly-dominate we enter yet another of these 'bust' phases but it can then lead to more severe recession if not acute economic depression (Wall Street in the 1920s!) if unchecked.
At present governments are working feverishly to prevent another 'Wall Street Crash.' Controversially, they are using huge amounts of tax-payers hard-earned money to bail out the large financial institutions and financial structures of the West. But that is not all: much of this money has to be borrowed, substantially increasing the national debt of these countries. Of course, if such a high-risk strategy fails, the crash - make no mistake - will be even greater! As the old adage goes, 'the bigger they are, the harder they fall' - the wealth of the West was as nothing back in the 20s compared to the present day, but bankruptcy will be the order of the day for many additional thousands if the present high-risk 'rescue plan' fails than would otherwise have been the case.
For the last few years the City of London has been filled with very young and very rash financial speculators. If you go down to the old city you will see them there - no longer in their many hundreds but now in their tens of thousands. Some of these people - hardly out of their youthful acne - live on property and financial market speculation and many of them became millionaires very easily and quickly. If you go down there you will see their highly-expensive luxury automobiles everywhere, you will see their penthouse apartments, witness their arrogance, perceive signs of their brash promiscuity and gasp in amazement that this particular point in history has given such power and wealth to so many such very young people - 'Wall Street' in the 20s was much more the domain of older businessmen!
About a year ago a very wise comment was heard; somebody said (sorry, I would willingly give credit if one could remember who said it, but I can't!),
"If we don't get back to looking at houses and property as homes, rather than as 'investment opportunities,' we are going to get into big trouble before long!"
This comment noted that private greed and exploitation were becoming too dominant for public safety in financial affairs. The comment noted that something is wrong when world financial markets can be too easily controlled by speculators who feel very little responsibility to their employers or communities at large. In short, greed can lead to calamity!
But the problem is even bigger than individual financial recklessness! The major world banks have just come through a period of amazing irresponsibility in handing out credit. Money has been thrown around like the confetti which - in truth - is all paper money ever is. This is why, in its bank rescue plan, the British government has insisted on the resignation of several bank directors; you can't blame the British government for doing that since - at least here in the UK - there has been some reckless leadership.
In truth, real wealth does not exist in paper money though very few seem to understand this. It exists in such things as gold reserves; paper money is only ever a promise of credit - nothing more. But the deep and foundational problem within our Western financial system is that it is based on trust, promise and confidence, when the utter murky truth is that our major nations are in debt to the tune of trillions of dollars. The United States, the United Kingdom and all of Europe have economies which are debt-driven. This will now increase still further in an attempt to prop up major national banks.
Some say that Capitalism is doomed no matter what but, make no mistake, capitalism has given security and real wealth to more ordinary people and families than any other system ever could have done. The free market economy - operating within a democracy - is actually probably the most fair and just system one could ever have in operation among men and women, encouraging hard and honest endeavour, fair reward for fair labour, perseverance, initiative and planning for the future. But capitalism needs to be solvent at base in order to function correctly and our western economies are no longer solvent (that is, they are unable to pay their debts).
The arrival of the system of stocks and shares which can probably be dated back to the early 17th century arrival of the Dutch East India Company, is what probably first introduced the elements of risk, confidence and, indeed, gambling to capitalism. Buying shares in that first famous company would make investors rich very quickly, but it was all about confidence. The system - under normal circumstances - made both companies and their investors quite wealthy. This system caught on because it seemed to work, but the essential rule was that any such company had to be genuinely viable, and genuinely profitable. Buying shares meant that one could re-sell them to others for a profit, but they would not be redeemed by the company itself. Unfortunately, unstable as well as stable companies have sold their shares often with disastrous results for unwary investors! Shareholders profits (usually payed annually) always need to be based on genuine company growth and profit (important to point out because of the wealth of scams in which shareholder's dividends can only be paid out by unviable companies through selling even more shares, or by other dishonest means).Ironically Karl Marx devised a system which, he at least believed, would lead to the most fair society imaginable. How disastrously wrong he proved to be! Marxism presided over unparelled misery, slavery, dependency and despair, with an elite ruling at the top who were more heartless, cruel, insincere and, frankly, just plain stupid, than the pre-revolution French aristocracy and pre-revolution Russian czars had ever been. George Orwell (1903-1950) had this abuse of power by people claiming to be the greatest public benefactors very much in mind in his 1945 novel, Animal Farm, with the now-famous 'All men are created equal, but some are more equal than others' line.
No. Marxism and Communism never had the answers and capitalism and the free market economy remain pretty sound principles but slipping into massive national insolvency (probably inspired by the worst of Keynsian economics: 'Never be afraid to run a national deficit or of high taxation'), was a horrendous mistake which could be part of an explosive 'cocktail' which will eventually 'bring the chickens home to roost.'
The Christian Hawk, October 12th, 2008.