When the party has to stop

Ultimately all financial crises are caused by greed. The rich want to become richer, and so they indulge in financial speculations that are aimed to increase their wealth for the minimum amount of work. The banks want to become richer, so they indulge in fractional lending, where they leverage their lending on the basis of what the market will lend to them, rather than on the deposits they have from customers. The poor want to become richer and demand services and money which has to be paid by the rich to some extent but by the people who are neither rich nor poor to a greater extent. Democracy is merely the least bad system of government and so the electorate votes for politicians who promise to spend money on them. The politicians spend money that they have not raised in taxes.

Like everything the economy can prosper for a limited time period while the banks are indulging in fractional lending, the rich are seeking to become richer by playing with businesses rather than producing anything and the poor are getting their money and their services, but there comes a time when the party has to stop, and that time is the financial crisis which we are experiencing.

It is a bit like a party to which virtually everyone is invited. Eventually the party gets out of hand and unless it is topped real damage and suffering will occur. At the end of every party there is a mess to clean up.

Having stopped the party we have to clear up the mess. The rich are arguing that they create wealth and should therefore be encouraged to continue so to do by even greater rewards because the wealth they create will pay for the mess to be cleaned up. The banks are arguing that they can clear up the mess if only they can continue to indulge in fractional lending on leverage and reward those who do this magnificently. The poor and the middle are arguing that the mess should be cleared up by others because they are poor and they should be allowed to continue to party.

All these groups believe that the party ending was simply an aberration and things will return to normal swiftly, and so they may, with different rules and better controls. But humans in pursuit of their own wealth and comforts are ingenious and will find ways to start the party up again and that new party will eventually stop.

 

One Response

  1. I agree with everything you say here Robert and so does a guy called Michael Hudson.
    He wrote a book back in the seventies called
    The American Protectionist Takeover. He is also on the tube
    a really great listen and read.

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