Wednesday, 12 May 2010

Por un puñado de dólares más

I am aware this blog revolves around fashion and what I am about to write could be considered out of topic. But given the current climate and being a quasi-economist I can't keep my mouth shut.

I want to start by making something clear: it's a shame what the financial sector is doing to the global economy. I believe, at this point, it is pretty clear the crisis started with the subprime mortgages. At that moment, the goverments of the world's leading nations were forced to rescue the banks in order to prevent the collapse of the economy. As stated by the sociologist Nicholas Taleb: "We have managed to combine the worst of capitalism and socialism, by socializing losses and privatizing profits. " But it was necessary, we had no choice. However, from that moment on we all thought those goverments will put a curb to speculative practices. How wrong we were!

Right now, if we look at the problem from a European perspective, we see that after the governments went into debt to rescue the financial sector, the said sector wants to speculate on Euro based on that debt (!) Well, how do they want to do that? By sinking Greece (they would do the same to Spain or Portugal, or even the UK, given the chance). And then I wonder, are the Greek workers guilty of the greed of some and the incompetence of others? No, they aren't. The world is so unfair. But this is the society we have. Now we must ask ourselves what kind of society we want and what we are going to do to change it.

Soy consciente de que la temática principal de este blog gira en torno a la moda y que lo que voy a contar ahora se desvía mucho del tema. Pero teniendo en cuenta las circunstancias actuales y mi condición de cuasi-economista no puedo callarme.

Quiero empezar dejando las cosas claras desde el principio: me parece una auténtica vergüenza lo que está haciendo el sector financiero con la economía mundial. Creo que todos tenemos bastante claro a estas alturas que la crisis empezó con las hipotecas subprime y que los gobiernos de las principales naciones del mundo acudieron al rescate de los bancos para evitar el hundimiento de la economía. Como bien dice el sociólogo Nicholas Taleb, "se combinó lo peor del capitalismo y lo peor del socialismo: socializar las pérdidas y privatizar los beneficios". Pero no hay que olvidar que era necesario, no había alternativa. Sin embargo, a partir de ese momento todos dábamos por hecho que se pondría freno a las prácticas especulativas. ¡Cuánto nos equivocábamos!

Si avanzamos en el tiempo hasta el presente y vemos el problema desde la perspectiva europea, nos encontramos con que después de que los gobiernos se endeudasen para rescatar al sector financiero, ahora ese mismo sector pretende especular con el euro en base a esa deuda(!) ¿Cómo? Muy fácil, hundiendo a Grecia (no dudarían en llevarse a España o Portugal , o incluso Reino Unido, por delante si tuvieran la oportunidad). Y yo me pregunto, ¿qué culpa tienen los trabajadores griegos de la codicia de unos y de la ineptud de otros? Ninguna, el mundo es así de injusto. Esta es la sociedad que tenemos. Ahora hay que preguntarse qué sociedad queremos y qué vamos a hacer todos y cada uno de nosotros para cambiarla.


CH ¦ spot said...

It ain't no shame at all!

At first the US government was not able to look after its people so that everybody could enjoy the security of an owned home. Instead of tax reductions, two wars were and are fought in Iraq and Afghanistan. People, meanwhile, had no choice other than turning to subprimes in order to getting a home. Remember, everybody has the right of housing.

So the banks helped in getting the poor housing, which they would never have been able to afford without. Fighting two wars, economy changed, the state houshold went into debt, prices soared, jobs went down the dole, people could not longer afford mortgages and charge cards, and that's where it all started.

Ignited by reckless governments such as the US, who gave a damn shit on the wellfare of its people. The banks were helping, the financial markets were only reacting to politics, they were not making politics. The few speculants who did make money out of the situation are harmelss, compared to what governments and their organizations such as Halliburton made in profits.

So the "rescue of the banks" was in fact the rescue of the economies, as the banks, which are a vital part of the economy, got into troubles without their fault. So governments were just cleaning up what they had caused, not more.

And now they are doing it again. Not because of the banks, and not because of some speculants. The financial markets are again just reacting to politics. Had nothing been done, Greece would have gone on forever. Remember, it was the government of Greece which turned to creative accounting in order to get the Euro, not a bank!

So it is understandable that you, and many others, cannot keep your mouths shut, but please, keep it straight to the politics as it is. It is neither the banks, nor the financial markets that are responsible for all this. It is our politicians, and I believe it is US, yes US, who elect them.


María said...

I agree with you partially. I think you are right about the wars and of course, the politicians and especially the Bush administration did helped to destabilized the whole economy.

As I said in the post, the bank rescue was necessary. And I still think it was, otherwhise the economy would have collapsed. But I don't believe, as you seem to do, in the banks benevolence. They created subprime mortages in order to earn more money, after all it's just bussiness for them.

And talking about Greece, let me tell you that it was Goldman Sachs who helped the Greek gorverment to mask its debt.

joanne said...

as i am not even remotely close to being a quasi-economist, i actually don't know as much as i'd like to about the whole economic crisis in EU. but this post definitely helps :)

Leslie in Adams Morgan said...

@ Allure: Your blog is one of the first I started reading on a regular basis and I could always tell through your writing that you are a smart, intelligent woman ... your post here further proves it.

@ bizfreak: are you in the US? The banks were not benevolent caretakers helping out where the government would not. Get real! They were making loans and turning them over as fast as they could. They didn't care if the people taking out the loans had incomes, good credit, or any possible way to make the payments. And many of the people taking out the loans were making poor decisions, taking out balloon mortgages, and living off their credit cards because they couldn't afford their mortgage when the payment skyrocketed. It was only a matter of time before their house was put into foreclosure. In the meantime, the banks had turned their loans over to other banks several times, making healthy profits along the way.

Yes, all Americans are entitled to housing but we are not all entitled to be home owners especially not if we chose to buy houses beyond our financial means and then can't make the payments. The fault lies both with the American people and with the banks.

Anonymous said...

I totally agree with your post. And as you say, partially with the 1st comment. Maybe that's the case in the US (i really doubt banks have nothing to do with it, as they were making tons of money... at least they accepted all those risky mortgages). But in Spain, I thought the government would ask for that backup money back to banks, or at least a compensation, or something to avoid this happening again. But never thought the only solution, or the 1st one, would be making society pay for it.

At this moment, in my humble opinion, as I have nothing to do with economics I'm only interested in what's going on in my country/world (as everybody should be...) markets are leading governments. And if Bush went to wars it was only to make profit himself (that would be more market than government...).

But it's incredible how people, at least in Spain, is doing absolutely NOTHING! And only blaming the actual government.

(it was easier than i though saying this in english :) i really liked your post, loved to have more knowledge to make a post like yours!)

María said...

Thanks for your comments. They help to enrich the post.

Leslie, Diarte: I couldn't agree more with both of you.

CH ¦ spot said...

No, I am not in the US, I am in good old Europe, from a country which was not hit hard from the crisis. Why not? Because we have a better government operating wise, much wiser than the US or even the European Union.

Banks were giving away mortgages cheaply, because they could take up cheap money on the markets. And who is setting the interest rates for the capital markets? The banks? Nope, the government via its central banks, i.e. the Fed in the US. Interest was kept low so that also the government could benefit from cheap money to finance its expenditures, that go beyond the two wars (just think of Obama's health programme, which is barely needed, but which the US cannot really afford!).

As someone that has been working in the financial industry for 35+ years, let me tell you that never every there has only one bank caused a crisis. Banks and the markets they operate in are just reacting to the general economic environment, and that is seldom ever "made" by the banks or the financial industry in general. Merely it is made by the governments. It's all politics. It's the people's representants that we call politicians, and that we elect on free basis.

So when one large US insurer ran into troubles, was it his decision to be rescued with 180 bn Dollars, or the government's? The cash for clunkers programme, was it invented by the auto manufacturers, or by the government? The "rescue" of large banks such as Citi, BoA, ABN Amro, RBS, UBS etc, was it done by themselves? Nope, it was tax payer's money that the governments used without even asking their tax payers. The rescue of Greece will eventually cost around 750 bn Euros. For the result that Greece will carry on as it did in the past. At the end of the money, Greece (and the EU) will be at exactly the same position as they are now, i.e. Greece will still be broke.

All these rescue programmes had two impacts. 1: houshold debts soared, and 2: they kept countries, companies and jobs alive that have no future and are not worth to let survive.

The only quick and sound remedy therefore is to let companies go bankrupt at the first sign of troubles. There was only one company that went down the dole, Lehman. That company is not going to cost us anything more. All the other still are. Likewise the only solution for Greece will be immediate state bankruptcy. Otherwise that country will cost us forever.

The euro zone must urgently be split up to exclude weak countries such as Spain, Portugal, Ireland and Italy. These must return to their old currencies and have floating exchange rates to the Euro. Everything else will lead to a European disaster. I fully agree that the common people in all those countries have not done anything, yet they will be the victims of it all. The victims of the politicians, not the banks or the markets.

Therefore let's end what cannot succeed, and let us end it quickly. The social plans needed to take care of the jobless and poor will be cheaper on the long run, because with he upturn of the economy, the jobless will get back into jobs. Tax money is better spent on those who need it, than on a company like GM, who continues to produce junk cars nobody really wants.

So to make it quite clear, it is not, and has never been, the banks or the financial markets that caused the crisis. The Lehman debacle was not caused on their own, merely they became a victim of the general economic situation.

It was solely the world's governments, and especially the Bush junior administration which was let going eight years too many, that led the world to the edge of collapse.

The markets reacted to stupid governments, using up the chances offered by them. So what's wrong with that? If somebody threw money at you, you'd take it, wouldn't you? Anybody would, even though he or she realized that the one throwing the money was stupid.

María said...

First of all, I've looked at your profile and you live in Switzerland. Your goverment operates wisely? Ha! Being a tax haven might have helped, non?

Plus,you bared yourself by saying you have been working for a long time in the financial sector. You are just defending your own interests. Which is very fine, but don't try to fool me. I don't need visionaries coming to tell me what this is all about, I know it perfectly well. You're a liberal and it's pretty clear that I am not one.

Leslie in Adams Morgan said...

@ bizfreak: you have not addressed your statement that the banks were operating as benevolent caretakers in the USA and my rebuttal as an American citizen that they were not. Your argument is all over the place. You are now agreeing that the banks were operating out of self interest in order to make money?

And as an American citizen, I will comment that Obama's healthcare program is most definitely needed.

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