Opinion – The role of governments in this financial mess


Shortly world leaders will meet in Washington to discuss the financial crisis. I am very interested in how we respond to this mess.

The existing system is trying to defend itself from change by crying foul: Long live C Kapitalism as if capitalism is ending. The system hopes that people will reject change because their identity is somehow vaguely threatened. That is just nonsense and this crisis is so big that people now want change.

Companies are like children

Let’s understood that in the same way that children cannot moderate their own behaviour, capitalism cannot moderate it’s own behaviour. This idea of letting the market decide was obviously a terible idea and it was invented by the out of control children themselves. It’s like letting the inmates run the jail – an idea put forward by the inmates that can only end badly.

Most parents know that – generally – children are a great blessing. BUT. If they are left unsupervised they will eat junk food until they vomit and run around naked and uncovered. In the same way capitalism is a blessing. BUT. If it is left unsupervised it will eat junk bonds until they vomit and they will run around naked and uncovered.

To solve this problem, a parent has to take the wild child under their wing and watch every step, retraining them. This is called reparenting. The child will yell, scream and rebel. But the change is needed. Children are fabulous and a treasure. We need well behaved children.

In this same way, the parents of this world – governments – have been given a mandate by God to manage things so His children (the people). As they are now stepping up to their role in life, the kids are using the newspapers to scream kick and shout. But this must not deter the parents from disciplining the children and from taking up their God-given role.

IN 1910 the Home Secretary, Winston Churchill memorably said that the civilisation of a society can be judged by the way it treats its prisoners.

I think that is a good starting point, and that can now be expanded to include… how it treats it’s inhabitants. Are the people of this world a matrix-like nation of resources, or are people THE FOCUS? Do people exist for companies, or do companies exist for people?

That is how bad the situation has become. The “parents” of this world – the governments – need to step up and begin parenting. I am not at all advocating the end of capitalism. No no. It is a great vehicle to achieve an end. But that’s what it is. A vehicle. It’s not life. Companies are not people (even if they are deemed to be legal people!)

Somehow we all saw Enron, the movie, and no one did anything about it. Apparently the market would learn not to do it again. Those people gambled away until they collapsed, but no parents came to help them from themselves. So a heap of people saw that movie and said to themselves, wow, I think I can do that and not get caught. So they did. Where Enron crashed California, now Enron 2.0 has crashed the US and threatens to crash the world.

And don’t be fooled. The size of the CDO problem that wiped out Bear Sterns was apparently US$ 500 Billion. The market is totally unregulated and no one knows how large it is. Some say 50 trillion. Some say 70 trillion. Either way, only half a trillion of madness brought us here… imagine what 100 times that can do.

Here are some links to the timeline for this crisis:

And as usual the nice people at wikipedia have given us a short simple summary of the problem: Subprime morgage crisis:

Causes of the crisis

The reasons for this crisis are varied and complex. The crisis can be attributed to a number of factors pervasive in both the housing and credit markets, which developed over an extended period of time. There are many different views on the causes, including the inability of homeowners to make their mortgage payments, poor judgment by the borrower and/or the lender, speculation and overbuilding during the boom period, risky mortgage products, high personal and corporate debt levels, financial innovation that distributed and perhaps concealed default risks, central bank policies, and government regulation (or alternatively lack thereof).

And there you have it. Amonst a lot of reasons, this is the one that triggered all the other risks to become a reality: the inability of homeowners to make their mortgage payments. If people could make their payments then the other risks were manageable.

Capitalism is a useful tool, NOT and end in itself

It’s all about people. For the people, by the people. Christianity, the bible, churches… it’s all there to help the people, God’s people. All people are God’s people.

In the same way, capitalism, government, institutions and everything else is there to serve the people. For the people, by the people. Not for companies and by companies. When did we lose sight of the goal… to serve the people.

Capitalism is merely a vehicle to achieve something. When something better comes along, we will use that. But it’s the best we have found so far. But it’s not the goal in and of itself, it’s just a means to a goal.

Somehow it became our life, it achieved a life of it’s own. Our TV filled with it, our newspapers too. Our emotions fluctuated with the stock price and inflation rate. No no. Capitalism is a means to an end and it must be USED to achieve that end: making this life liveable for as many people as possible.

Well, if we boil it all down to “the inability of homeowners to make their mortgage payments” then the resolution seems to be relatively simple. Why spend so much money propping up the system when the corruption under the system (the inability of homeowners to make their mortgage payments) remains unresolved.

Here is a good overview

Michael Malkin says the proposed bailout to help families and to help people is a terrible idea. He says

As I put it this morning: “Getting credit is not a constitutional right. Preserving home ownership should not be a government imperative to be pursued at all costs. Neither should foreclosure prevention at all costs.”

To Michael Malkin, I quote Matt 25…

For I was hungry and you gave me something to eat, I was thirsty and you gave me something to drink, I was a stranger and you invited me in, I needed clothes and you clothed me, I was sick and you looked after me, I was in prison and you came to visit me.’Matt 25:31-40

Look again at the verbs in that speach

  • you gave me food
  • you gave me drink
  • you gave me clothes
  • you looked after me
  • you came to visit me

Now may I turn your attention to the pressing need which is growing and growing by the day. Remember that the Lord asks you (individuals and governments) for action. Love is an action, it’s something you do… and it’s greater than faith and hope, according to the bible. It doesn’t save, but God esteems love very highly.

There is a massive signal that I hope you don’t ignore: tent cities are popping up all around the USA and in fact around the world (South America, Europe, Canada)

$300B – step one

And I go one step further in that I sort of agree with this article: The Problem Is Still Falling House Prices. This is a great article on the $300B that would to some extent resolve the problem of owing more than your house is worth.

But I go further back and point to the radical increase in house prices to begin with. Why did governments allow this situation to occur in the first place? I like capitalism, but do we have to permit gambling on everything? If you have money to invest, go ahead and invest it in businesses, invest in oil exloration, invest in something that exists and helps people. Go ahead and make money with your money.

You only need one house – step two

But. Do not permit investments into essentials for people. Do not let people own more than one house at a time – apart from the need to own two when selling the first one to buy the second. Don’t let house prices become so high that the common person can’t buy a home. I think it’s fine that more desirable houses cost more. For example its fine that a beach house costs more than a ramshackle run down house in the ‘burbs.

But is it really ok when prices have gone so high that real flesh and blood people can’t afford one, so they look for shortcuts, people begin to gamble, they make liar loans, and in the end they default and then prices collapse… the children ate and ate and ate and now everyone is vomiting, tummies ache, the usual bedtime routine is completely broken.

Effective parenting – step three

The parents somehow thought the children would moderate themselves. They never said they would. They didn’t. And they won’t. It’s not in their nature. In fact their legal obligation is to make as much money for their shareholders as they can – and they can be sued if they don’t do that!!

The system is broken and greed is endemic. Capitalism is good, but extreme and unmoderated capitalism is very very bad. Let’s not only moderate the behaviour of the wild children, but let’s – each of us, individuals included – perform the God given role that is assigned to us.

For some companies that means restraining ourselves. For some people that means getting involved and helping protect others from abuse. Christianity is not a spectator sport.

For I was hungry and you gave me something to eat, I was thirsty and you gave me something to drink, I was a stranger and you invited me in, I needed clothes and you clothed me, I was sick and you looked after me, I was in prison and you came to visit me.’Matt 25:31-40

What am I saying? Three things:

  1. Capitalism is the best we have, but it needs a parent to moderate its behaviour
  2. It’s ALL about people. People are NOT resources. Look after them.
  3. Remove the essentials for people’s life from the gambling system

For those who are still reading this, but perhaps you don’t like my touchy-feely, people-hugging approach, then listen to John Talbott (ex-investment banker) speak about how we came to be in this mess

Source: YouTube (John Talbott, author of “Obamanomics” discusses the roots of the current economic crisis with Keith Olbermann)

4 responses to “Opinion – The role of governments in this financial mess

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  3. Pingback: Is anything too hard for Jesus - the financial crisis « Faith. Hope. Love.·

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