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I’ve watched the economy for 30 years. Now I’m truly scared
Will Hutton
London Observer
Monday, Sept 29, 2008
If more people understood what has happened in the British and American banking system, the financial crisis would only be containable by the immediate partial nationalisation of every bank in Britain and America. There was not a run on the banks by depositors queuing in the streets to withdraw their savings. Rather, it was an escalating and terrifying run on the banks in effect by themselves, which, if it spread to millions of small savers, would reproduce the events of 1929.
In Britain, the money markets that the banks organise between themselves completely froze. Such was the break down in trust and sense of panic that some of the most familiar names in British high street banking would not lend to each other at all or, at best, just overnight. Instead, the Bank of England had to supply tens of billions to banks who found the normal sources of funds blocked.
I have been writing on the financial markets for nearly 30 years. I have known the system was becoming increasingly fragile, but for all the ferocity of my criticisms, I never expected the scale of today’s events. Or that I would begin to wonder whether my own bank would survive without nationalisation. The negotiations in Washington over this weekend to finalise the $700bn Paulson financial bail-out plan, and the expected vote on Sunday, are all that stands between the Anglo-American banking system and a first-order disaster. The scheme had better work.
(Article continues below)
This is not the end of capitalism, as some wildly claim; there is no intellectual, social or political challenge to a market system based on respect for private property rights, even by the Chinese Communist party. Rather, it is a crisis of a particular capitalism that has set aside respect for trust, integrity and fairness as fuddy-duddy obstacles to ‘wealth generation’. What we are relearning is that without trust and fairness, capitalism risks its own sustainability, even while it unleashes forces that undermine those self-same values. London’s money markets froze because of a trust collapse; banks simply don’t believe each other when they say their businesses are sound and will not default on their obligations. Trust matters.
And although some conservatives in Britain and America continue to make the ideological case against any government action as a response to the recent turmoil – governments necessarily do everything worse than the market – they have no alternative proposal about how to restore trust once it has gone. Trust is a reciprocal relationship, dependent upon a desire to be considered decent and honourable. Even in the dog-eat-dog financial markets, trust and integrity are matters of self-interest. However amoral you may be, it is in your interest to care about your reputation, because if you behave badly you will not do business with me – or others – on favourable terms again.
But the scale of the personal rewards now available in London and Wall Street – £15m-£20m at the top is the norm – along with the greed-is-good doctrine associated with extreme laissez-faire economics, has trashed the need for individuals to worry about integrity. They don’t need to be concerned about their reputations; they just need one deal or one year at the top and they need never work again. The incentive structure has so departed from one of the principal norms of fairness – proportionality between value added and reward – that it has eviscerated trust relationships and integrity.
Everybody tries to ‘game’ the system on their route to vast personal fortunes – whether short-selling, packaging up dud mortgages as prime mortgages or telling lies about their financial viability – and the result is that the system is getting wise. The best course today in any financial transaction is to presume zero integrity. Credit is drying up and with it the very lifeblood of the economy.
Worse, now that the system is in trouble, financiers are turning to taxpayers in the US and Britain for help without understanding the other key principal of fairness – that we will consider helping those who for no fault of their own get into trouble, but not those who freely created their own bad circumstances.
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12 Responses to “I’ve watched the economy for 30 years. Now I’m truly scared”
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September 29th, 2008 at 4:08 pm
Faggotty fairy cakes is what the British like to make the world eat as they gourge themselves on greed dressed up as Labour Party socialism. Make no mistake: this toxic bilge began in Britain and was masterminded by them. As the shit hits the fan, remember who brought it to you: the British. There accents may be cute, but they are lying weasles and have fucked the world.
September 29th, 2008 at 4:51 pm
Those criminals on Wall St. and in Washington gambled and lost billions, and now they put a gun at the taxpayers head and say, if you don’t help us well pull the trigger. Well thank God, a majority of republicans called their bluff and told them to shove their taxpayer bailout plan. An overwhelming majority of voters were finally heard. Now lets tell them to nationalize the Federal Reserve and start putting these crooks behind bars. There is hope today for America. Come back to America Jesse Ventura…time to start the Revolution!
September 29th, 2008 at 5:24 pm
No mate not the British people who a screwing America over but Rothchilds and the other 12 elite families, not us the British people…we like you are getting screwed by the same system run by the elite…in fact we pay more taxes to these parasites than any other nation on earth so your not alone my friend Frank.
Quite simply put if you work for a living then your gonna get screwed mate be you French, German, American, Polish, Greek, Italian…if your in the working class your going to get f–ked over by these 13 families that’s how it is and always will be because we are just to f-ing stupid to do anything about it…got to face fact’s we are thick b–tard’s and we deserve what we get.
September 29th, 2008 at 9:56 pm
Frank Thoughts..your a knob head.
How can you blame the British for the U.S problems in their financial markets?
Go back to collecting cereal box tokens you fuck knuckle.
September 30th, 2008 at 6:53 am
“This is not the end of capitalism, as some wildly claim”
I do not find this to be a wild claim at all. Maybe it’s not the “end of capitalism”, that would be as pointless a concept as “war on terror”, but I certainly see the end of the global market economy and the infinite growth paradigm. Capitalism works when the lines point upwards, when there is growth. On the decline side, especially when there is no foreseeable end to the decline, it just breaks down.
The trouble is not just the economy, we have a severe energy and resource problem aswell, even if everybody seems to have forgotten. Oil is still almost 100$ even when the demand is way down. Everything points the economists to the obvious : it’s a finite planet after all (economic heresy?).
Welcome to the century of declines.
September 30th, 2008 at 7:10 am
They want a fascist planet with the superwealthy ruling it all
Since we’re too independent, America must be led to fall
When our credit’s been exhausted to subdue the Middle East,
They’ll install our debtor nation in the body of The Beast
Traitor…Dare call it treason
http://www.youtube.com/watch?v=uw5dP5gy2Vs
September 30th, 2008 at 7:24 am
Actually it IS the fault of the Brits: the United States is not a country but a COMPANY – the Virginia Corporation, a wholly owned subsidiary of the British Crown. This is the reason the US flag is fringed with gold tassels in courts of law: it signifies British Maritime Law as the prevailing law of the US.
September 30th, 2008 at 7:56 am
don’t be scared Will, the worse is yet to happen, get in the back of the bread line !!!!!!!!
http://www.youtube.com/watch?v=BSxYIBSuBtk
September 30th, 2008 at 8:22 am
The National Socialist world revolution is now in effect. We will have a few ‘independent’ banks working alongside (there will not be enough for true competition) national, government banks. Nationalisation will spread to other industries until the gov. has massive control. However, the government will continue to be controlled by the wealthy few, only now those unseen, unknown controllers will have much more power. Half the world is run by this nationalist, socialist system, now the relatively independent West will follow suit. Power will be ’shared’ by a collusion between a few large corps and a few large governments. The poor majority will have no leverage for wage increases, unions will be infiltrated & subdued and the old 2 tier system will resume. The unfair pyramid becomes the even less fair obelisk. Social mobility will be stifled to death! Maybe…
September 30th, 2008 at 8:58 am
think about it.
i can build my own dwelling on mother earth,
i can grow food a plenty for sustinence,
i can protect my small dwelling from any apparent danger,
god hath provided me with evertything i need to live a prosperous and real life,
i say let the shit hit the fan bring it down lets all come up for air,
i know id be a lot happier out of the human rat race.
September 30th, 2008 at 9:40 am
Thomas Jefferson
“If the American people ever allow private banks
to control the issue of their money,
first by inflation and then by deflation,
the banks and corporations that will
grow up around them, will deprive the people of their property until their children will wake up homeless on the continent their fathers conquered.”
http://www.youtube.com/watch?v=1V5iCUBEUx4
September 30th, 2008 at 10:02 am
Neil, London Says it is the Brits but it aint,,,he is correct on America being a company not a country…however the British Crown are German they changed the name to Windsor prior to WW2 so we would not demand the bastards be sent back home to their Fatherland.
The city of London is dominated by the bank of Rothchild and they are Jewish the Fedral Reserve in America is Rothchilds bank they are geting screwed over by a Jew not the British.
The Royal family is just one of the 13 Elite familys screwing everyone.