
A lawn mower will just as happily mince your foot as cut the grass if you point it the wrong way. The global economic system has been pointing the wrong way for some time now.The unthinking, unaware (idiotic) whirly-chopper we also know as the global financial system has finally achieved its destiny in a gush of green from severed financial arteries everywhere. The global economy is now bleeding out.
Rather than clotting up and healing, the pace of deterioration in the status quo appears to be quickening as the resources that were available to governments and business as a legacy of the "pre-crash" era begin to diminish and disappear.
There are so many threads running through each day it's a challenge to track them, never mind make sense of them. Here are a few items that caught my eye.
Former US Federal Reserve Chairman, Alan Greenspan, blamed by some for creating the housing bubble, now says it may be
necessary to nationalise the country's banks.
In an interview with the Financial Times published on the paper's website on Tuesday, Mr Greeenspan said 'it may be necessary to temporarily nationalise some banks in order to facilitate a swift and orderly restructuring'
Long one of the world's most powerful proponents of hands-off financial regulation, Mr Greenspan indicated nationalisation may now be necessary.
'I understand that once in a hundred years this is what you do,' he said.
At the same time comes news that one of the wealthiest states in the United States, California, is
about to go broke. Faced with a drop in tax revenue of US$40 billion, Governor Schwartzenegger is looking at sacking 20% of all state employees as a prelude to shutting down the state government altogether if the legislature is unable to agree on a new budget. The Republicans in the legislature want to cut taxes and spend even less, in line with their ideological view that no government is good government. Looks like they may get to find out.
These two stories, for me, throw into sharp relief the primary elements at play in this whole rolling disaster. A far as I can see, the people who allowed it to happen are now divided in two camps: those who think they did wrong (or could have done better) and want to do something else now, and those who see badness, but no wrong, and want to use this as an opportunity to explore the further limits of the very same policies of non-regulation that lead to the whole mess in the first place. They call themselves "conservatives" while they have done anything BUT conserve. It fair takes one's breath away to read their words and listen to them talk. They obviously had no idea whatever what was going on when times were good and are today equally bereft of any useful model of reality now times are not so good.
People losing their jobs each day now number in the tens of thousands in country after country. This is a disaster these mis-named "conservatives" have wrought....and they can't see it at all. Amazing, yet understandable or they could not have pursued with such vigour and determination the policies that caused it all.
That's all grass (and toes) in the grass catcher now. As these contractions in income feed through into the so-called "real economy" in shrinking demand and more bad debt, there will certainly be an accelerator effect operating for some considerable time yet.
Meanwhile, the US Congress passed its stimulus bill. They are supposedly going to use almost US$800 billion into prop up failed banks and support activity that is supposed to help the economy keep going. The same people who couldn't see the crash coming are now planning how to combat it. Good luck with that. The blind gardeners now turn into surgeons.
The effects of these events will continue reach us here in NZ in the months ahead. Already large numbers of NZ companies have wage freezes and hiring freezes in place. In some cases, these have been ordained by their overseas owners as part of the big corporate picture globally, regardless of how well or poorly the local NZ operation actually did. My own employer, part of a US-based conglomerate, has imposed such policies recently despite the New Zealand / Australia operation having just had its best year ever and good prospects for the year ahead, despite the downturn elsewhere.
If most of what we read each day makes little sense, that's because it doesn't, really. These events are being driven by an economic machine we have allowed to usurp our own conscious control of the world we live in. The gardener doesn't need need to tell each blade of grass how to grow, but he does need to know where to oint the lawn mower and where not to. It bears repeating: A lawnmower will just as happily mince your foot as cut the grass if you point it the wrong way. The global economic system has been pointing the wrong way for some time now.
Hope you have your steel-toed boots ready. They will come in handy about now if you haven't got them on already.