Global Economic Crisis

None of us can honestly believe that financial institutions did not know the consequences of the abuses they made concerning the use of private real-estate debt as an investment option. It would be unfathomable to believe that the unavoidable Global Economic Crisis was completely unforeseen by the mathematical brains employed by the world’s most powerful banks. It must have at the very least occurred to them that offering incentives for private citizens to incur into debt beyond their capacity for credit and then using the re-financing of that debt as the means to fill investors’ pockets was a flawed concept to say the least. Also, to even think that they could not have know that lending the same values in digital “pixie money” many fold, thus generating an illusion of a greater availability of funds that there really existed, was obviously going to have penalties down the road.

I think it is perfectly logical to believe that a financial institution that is replete with economists, mathematicians, strategists and what not, makes scenario studies for whatever options they decide to make available to the market in general. It would be irresponsible of them not to. So, if they did run scenarios, it is reasonable to think that the consequences we face today were indeed predicted; even if not precisely. After all, even through plain common sense it is easy to figure that lending money to someone who cannot repay you is bound to end up badly, more so even if you have the brilliant idea of using the debt to attract more money into your pocket by saying that the payment of the bad debt is the thing that will generate a return to your investors. Come on! We cannot be naive to the point of thinking these institutions were not well prepared to anticipate and counter these effects.

So, if they knew – and I say again that they had to know – why did they do it anyway? The unsurprising answer is quite simple: For Profit!

This scheme perpetrated by these institutions must have generated such a flow of funds to them that it was all worth it; at least to those men and women who controlled these institutions. Some say we are the ones paying the bill for it, and they are correct. We happy investors and private citizens, but can we blame them? Certainly we can, but not only them because we were greedy too. Each of us, investors, has a share in the guilt for the current crisis. Why? Because we CHOSE to believe in a continuous growth of world economy that could not possibly be. We CHOSE to let them mislead us into thinking that constant economic growth was a good thing and that it would make us all very rich. We chose to surrender to the allure of consumerism and easy money.

The dynamics of the world economy in the age of globalisation is a very perverse thing. It is wicked in the sense that it is totally dehumanised. Investors see only the return upon their investment as a collection of numbers on a computer screen. They are not privy to the consequences of those numbers in terms of the human, social and ecological cost of their profits. Banks and corporations have a glimpse, though. They should know better but greed is supreme to them; it’s their nature. As for us, we let them do it because it is comfortable to us. Now, we pay the bill and rightly so.

The Global Economic Crisis is an opportunity for us to re-think our ways. It is a time of reflection for the lot of us, greedy consumers, who were doing everything for easy money so that we could own luxury cars and travel with style to exotic destinations. In the process, we ruined our economy, our society and our planet. Shall we try something different now?