Thursday, 28 March 2013

Whoops! by John Lanchester

Whoops! Why everyone owes everyone and no one can pay.
Publication date: 26th November 2009
Published by: Penguin

I am part horrified part fascinated by the state of the global economy. I am constantly looking for someone - anyone - to clarify how we got here. Whoops! has to be the best clarification to date. It isn't pretty - more like depressing with a gloomy ending - but, as they say, knowledge is power and maybe what is needed is for more of us 'mere  mortals' to grasp just to what extent the financial sector f*cked things up for everyone - and it is colossal - and say 'no more!' Because governments aren't willing to and so it could happen again.

It turns out there were numerous contributing factors over many years and it started with the fall of the Berlin Wall - an interesting theory I haven't heard before, but makes sense. Then there was globalisation which led to almost everything being made in China, making China wealthier than ever, leading to China using that wealth to invest heavily in the US economy. The UK went from a country that produced stuff as well as services to one that produces almost nothing and only provides services, the biggest market being financial services, on which it is now dependent.

I did get lost by some of the explanations, such as the point of mortgage backed securities and the concept of risk management in banking (which is unlike any other kind), but I grasped enough to get why they were major contributing factors to the meltdown and subsequent credit crunch.

Lanchester made an interesting point with regard to blame, an opinion I have held ever since 2008 but hardly ever hear or read in the media, which is: as much as bankers and governments who failed to regulate them are responsible, so are the collective 'we'. From our obsession with owning property and getting excited as the value continued to go up (into infinity and beyond?)  to our gorging on credit to finance everything from our luxury holidays to our must-have Mulberry handbags.

In the western world whenever there is a major incident that affects the lives of the people, such as a major accident rendering it a health and safety danger, human rights abuse, or terrorism, that country's government tends to step in and create laws to (a) protect its citizens and (b) ensure said incident doesn't happen again. What I learned from this book is for the first time governments (and I mean UK and US in particular) aren't prepared to step in.  Why? Because the banks are 'too big to fail' and they are too powerful for governments to mess with. So the result is 'we', as in the tax payer, will just have to keep on paying for the reckless behaviour of the banking sector (into infinity and beyond?).

Not wishing to alarm anyone but, unless something is done, the financial crisis affecting the west could be the making of a future one reads about in post-apocalyptic dystopian novels, if you ask me.

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