The only way to avoid another meltdown is to get feral finance--the out of control banking industry--under control.
August 4, 2011
How far are we from #gfc2? For those not aware, #gfc2 is the Twitter hashtag used for "global financial crisis 2". And the question I ask is a real one.
A couple of weeks ago I wrote a blog wondering whether July 2011 felt like July 1914. And then along came a Greek deal, and now a US debt deal, and you might presume I had been prematurely melodramatic.
I wish that were true; I very much doubt it is.
Just to put this in context, the Guardian has reported that:
"Stock markets took fright on Wednesday as fears grew over the health of the global economy and the ongoing European debt crisis.
There was heavy selling in London when trading began, sending the blue-chip FTSE 100 index falling by 91 points, or 1.6%, to 5626. There were also heavy losses across Europe, The French CAC and German DAX indices were down 1.6% and 1.1% respectively.
The European markets took their cue from Tuesday's 2.2% fall in the US Dow Jones index. Overnight, the Japanese Nikkei fell 2.1%, its biggest daily loss since the rout that followed Japan's March earthquake."
And the effective interest rates Italy and Spain are paying have gone over 6% when Germany is paying 2.4%, while the US is being marked for credit downgrade by all major ratings agencies. Gold has hit a record price. Perversely, the cost of UK debt has fallen to new lows: we're now a safe haven. Anyone who thinks we are out of the crisis has to be seriously misguided. And as for those agreements, to shift world war metaphors, think of them as being something equivalent to Chamberlain's Munich deal with Hitler – simple exercises in staving off the inevitable.
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