Graham of Anywhere

Graham's blog: politics, poetry, and introspection

Scottish banks fall from grace

So, the Credit Crisis. The problem, as distant and invisible as it was, started in the US when the financial giants decided the way to increase growth was to sell credit [mortgages] to those with low credit ratings. Bad debt of course isn't something you want on your books, so they packaged them up along with better quality debt and sold them on as securities. This almost made sense until the investment banks, who didn't really know much about mortgages due to the fact it was historically a business exclusive to the retail banks, starting buying them, re-packaging them, and selling them on to retail and investment banks alike.

So, if my understanding is correct, we ended up with a very expensive game of musical chairs. When it started coming to light that much of these securities were in fact laden with bad debt and therefore worthless, the music stopped and the banks started to realise the sheer scale of the risk they'd taken on, and promptly stopped lending to, well, everyone. Liquidity dries up, almost overnight, and the banking giants start peering down the long dark tunnel into oblivion.

I've simplified this for my own understanding and have undoubtedly lost important concepts in the process, but in the end, the banks were naive, greedy and ultimately reckless. Perhaps it's entirely deserved that those organisations have failed, but what about the employees who've lost their jobs? (What about the employees of all the other companies who've gone bust?). What about national pride?

One of the world's oldest banks, the Bank of Scotland (HBOS), has now been sold to an English conglomerate, Lloyds TSB. One of the world's largest banks, The Royal Bank of Scotland (RBS), is now 70% nationalised. Both are disgraced and diminished. They've fallen from grace with the Scottish, and British population.

Iceland's financial sector has collapsed taking the government with it. Many British individuals and organisations, both public and private, have lost fortunes. Iceland as a whole seems to have fallen from grace with Britain.

The great technical and financial powerhouse of Japan is in recession, as is half of Asia and Europe.

And of course, where it all started, in America, some of the country's greatest and most respected financial institutions have disappeared overnight leaving not just the nation, but the whole world, in an economic meltdown.

I'd love to think that we, the human population of the world, will learn from the mistakes made but I know we won't. Those with the desire for power and the greed for money will always screw it up for themselves, and everyone else.

I understand why some people that I know really just want to grab a wind turbine, a few solar panels, and retreat to a cottage on the Isle of Lewis to live in blissful isolation of the world. But, alas, I'm a city kid, a digital kid, and I'll never convince myself to ignore the world. Like most of us, then, I'll continue harbouring a vague resentment of the world and our ways, and a frustration towards society and its flaws. I'd love to live to see the day we reach the utopian ideals of a planet working in harmony for the greater good.

Ha. I'll just stick to drinking beer and doing what I can for the communities in which I circulate. Just, someone, pat me on the head and tell me they understand. Lol.
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sudo   ...humanity did not make a mistake.
Economic crisises (?) are a natural result of capitalism. The economy goes up and down and down and up and up and up. What do people expect? An eternal, ever-growing fortune? That's Utopian.
That's communism. We had it here for 5 decades - it doesn't work. It just delays the inevitable.

Soooo..... I don't have a solution, either.
But I have A FRIDGE FULL OF PEANUT BUTTER JELLY SANDWICHES! :)
grum   Capitalism is human, as is socialism or anything else. In the end, our world is of our own making.

I think utopia is a money-less society :) StarTrek style, haha. True socialism, I guess. Not that I'd call myself a socialist, by any means. I like the opportunities that capitalism provides. I think there's probably a way for capitalism to work without boom and bust, but it would probably rely on institutions and individuals, and therefore the markets too, being sensible.

So, really, I'll just take the sandwiches :)
jdg369   Holy Shit, Scottish banks used to be IN grace?
grum   Ha. Maybe it was a national pride thing.
Cloaked   Grum, I hope you understand that private property and enterprise are foundations of socialist democracy. Socialist democracy is essentially capitalism with sufficient regulation such that workers are not exploited while the state pursues social programs to create equal opportunity for everyone.

There are two main economic theories dealing with booms and busts - Milton Friedman's theory that states we can guide the market through the use of central banking (i.e. Federal Reserve) and interest rates. John Maynard Keynes (who was a total homo by the way) argues that government can weather recessions through massive amounts of spending. We kind of waver in between these two ideologies over time - in the 40's-60's we went through a period of Keynesianism where we attempted to fix the Great Depression through major spending. Then Friedman kicked in and we saw massive deregulation and lowering of interest rates to the level of 0% just a few weeks ago. We all thought Keynes was dead in the 90's, but he seems to be coming back quickly now that this "greed is good" philosophy seems to have fucked us over.
grum   I'm not overly political and I don't have a sound knowledge of economics either. I'm not even well-read. I do try to point this out.

Interesting info, nonetheless.