Wednesday, October 08, 2008

Cheap Oil but Financial Meltdown!

Nice to see that oil is back to $86 a barrel, and falling... trouble is it took a global stock market crash to accomplish it. This morning the British Chancellor, Alistair Darling, announced that £50 billion would be made available to banks who want some of it to help assist in the flow of money. That is of course exactly what money is - currency. In a spirit of distrust over viability of individual banks, it is individual banks who are hanging-on to their money, refusing to lend it to other banks or more generally in loans to small businesses, which will slow down the economy further.

Written-into this red-cross package are apparently guarantees and regulations to prevent rogue financiers from screwing the system again for their own gain, and bringing it to its knees at some later date, needing yet another food-parcel drop. If the British tax-payer has to bail a bank out, he or she should not be expected to pay millions in bonuses to the chairman.

It is nothing less than the national economy, and ultimately the world economy that is at stake. All investors and anyone with money in a bank account somewhere, waited with bated breath for this morning's announcement, promised last night. It is an incredibly complex issue, such is the intermingled and interconnected nature of global finance. James Kunstler's latest podcast (link given in Karen Blakeman's comment bleow) is pretty blunt, and he accuses the financial sector of all kinds of chicanery and dodgy packaging, repackaging and selling-on of financial packages with names and neat acronyms that belie what is really going on. Where in reality is our money, and maybe it doesn't exist at all, beyond pixels on a computer somewhere?

I for one will never invest money in the stockmarket again. It is difficult to avoid putting money in banks short of keeping it under the bed, and the "cashless economy" concept periodically rears its head - although I doubt it will again in any sincerity. We have been encouraged to believe in a new god - credit - and it may be that only the real God can get us out of this mess.


Yorkshireminer said...

Where is Kunstler's podcast Chris

Anonymous said...

Kunstler's podcasts are at I think Chris is referring in particular to the latest one which is #33 The Great Bailout 2008. He doesn't pull any punches in his podcasts and this is one of his best.


Anonymous said...

Well, if you are looking for the ultimate pessimist's case, at least from the US perspective:

link to Roberts

I don't know who is right on this: people such as Roberts and those members of the libertarian austrian school, or some of the more main stream economists. What I am sure of is that whatever the economy does , no single party or policy was responsible for this mess. At least in the US. I can't speak to Great Britain or anywhere else, really.


Professor Chris Rhodes said...

Hi Clarence,

yes, I think you're right, that you can't blame any single government for this disaster. To my mind, the real problem is the virtualization of money.

i.e. It is no longer directly connected to anything real, like goods or land or property or gold or oil... once it got onto those computer pixels it took on an ethereal life of its own, and is similarly difficult to tie-down.

Sure there have been rogue financiers and traders and damn them all! They should be in jail - perhaps on treason charges, if their wanton or simply criminal actions manage to bring down a country!

But assuming we do pull out of the present fiscal nose-dive, we must all learn a tough lesson which is that the only worthwhile investments are those such as I refer too, otherwise the same thing could happen again.

Whoever is in government must also enforce some draconian regulations (yet to be installed) to make sure this doesn't happen again. But will they?



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