Can anything good come out of the financial crisis?

Cleaver

Jennifer_Jane wrote: »

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Sorry to disagree, Cleaver, but I think the global impact will be terrible for poor people in poor countries, who have had US/UK:

I was being sarcastic Jen, sorry. Maybe I should start using smileys. Or have a signature like the mortgage advisors do:

I am a Sarcastic B*stard.
You should note that this site doesn't check my status as a Sarcastic B*stard, so you need to take my word for it. This signature is here as I follow MSE's Sarcastic B*stard Code of Conduct. Any posts on here should be read as sarcasm unless somehow otherwise indicated.

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Cleaver wrote: »

Again, I fully agree with you as it's a good theory. But using your knowledge of how governments work don't you just think they'll encourage a boom? For example, if Mr Cameron and is elected PM in 2010 (which is probable) and he suddenly found that the economy was taking off at the end of 2010, do you reckon he and his chancellor will:

a) put in sensible plans, similar to yours above, to ensure that the growth is steady, gradual and sustainable

or

b) proclaim himself the greatest polititian since the last one, bang on and on about Labour's failures and encourage growth as fast and as strongly as possible

I reckon option b. Which will last ten or fifteen years until it all collapses. At which point we'll bemoan the Tory party, vote Labour back in, the economy will rise and... etc. etc. etc.

Unfortunately, I also agree (b) is likely, however we are teetering on the edge of a cliff so high that we haven't seen anything like it since 1929, I mean if we cut the whole argument to the bone we could say ' the boom of 2000-2007 has caused the collapse of banks and nearly the economy, it can't be allowed to happen again'.

Maybe, just maybe, next time it will be different.

CLAPTON

Jennifer_Jane wrote: »

[/font]

Sorry to disagree, Cleaver, but I think the global impact will be terrible for poor people in poor countries, who have had US/UK:

A global economic crisis
The global economy is experiencing a sharp downturn, spreading from developed to
developing countries. Its origins lie in macroeconomic imbalances of an unprecedented
scale. An accumulation of debt by firms and households in some countries has been
matched by an extraordinary rise in export earnings and savings in other regions.
Behind these flows are millions of savers and lenders, linked through a financial
architecture of such complexity that neither accounting standards nor regulatory
oversight have served their intended purposes: prudential banking rules have been
overwhelmed by folly and fraud, masquerading as financial innovation.
This is a cycle that has played itself out periodically – economic historian Karl Polanyi,
sixty-five years ago, provided a classic account of how a utopian faith in self-regulation
has led repeatedly to exuberances of this kind in the rise and fall of market economies.
The consequences are felt everywhere. If the balance sheet of a bank shrinks, its
capacity to lend is eroded. If its lending is curtailed, businesses and households have
to reduce their spending. If demand falls in Birmingham, factories close in Beijing. If
production lines in China slow, demand for commodities from Africa dries up. The
vegetable shop next to the mine closes, and the drivers of the delivery vehicles are
asked to work short time, on half pay, and if the driver cannot pay his mortgage, the
bank forecloses on his bond, and the bank writes down its balance sheet again...
When a global motor company cuts back on making cars, it cancels its orders for
catalytic converters. Madam Speaker, this firm making catalytic converters is not in
Detroit or in Shanghai, it is here in the Eastern Cape. The mine producing the platinum
that goes into that converter is near Rustenburg. The worker in the factory in Uitenhage
and the mineworker in Rustenburg are now without work. And the woman who runs the
little stall selling vegetables outside the mine is making less money each passing week.
And their families, all of them, face a future made more precarious by the vagaries of
global finance. Trevor Manuel Extract from 2009 South African Budget Speech

Sorry for the long post, but I think Trevor sums up the global domino effect in a very personal and simple way. There is true poverty at the end of this chain.

Jen
x

There is of course a very real downside in a recession but then there were very real benefits in the boom years.

However, if we want to get rid of the bust periods then probably were need to get rid of the booms... would those poor people you mention above be better off if they never benefited from the booms.

Personally I think that boom and bust is better than no boom... obviously I would like only steady growth (no boom and bust.. who said that now?) but we don't know how to do that.
Sadly the Chinese people suffered awfully from the appalling policies of the communists before the current boom.

So I don't really see the current situation as 'bad' ..only inevitable

whathavewedone

I'm in complete agreement with Cleaver on this one.

I don't see any politician being brave enough to institute the sort of policies suggested. It wouldn't be popular and they'd be voted out at the next election.

Plus which I think the seeds for the next HPI are being sown now, with cash rich investors who made fortunes out of the last boom waiting to swoop like vultures once prices fall further.

Like it or not BTL will start again. There will always be people who need or prefer to rent and therefore we will always need landlords. Personally I am against secure low rent tenancies, it didn't work in the 1970s and I don't think it would work again. A lot of these places ended up like slums as the landlords couldn't sell them, couldn't get a market rent for them so just let them go to pot. There are a few near me, in the end the council condemned them so the landlord was forced to make them habitable but that is as far as he has gone. It's a great shame to see lovely Victorian houses in such a state.

As soon as there are real signs that things are improving, unemployment starts going down and confidence returns people are going to feel like partying like it's 1999. They will spend again and borrow again. It's human nature.

Whether the recession lasts 2 years or 10 as soon as it's over people will want to forget about it. Those who had their fingers severely burned will probably learn some lessons for the future but the majority will just be relieved it's over and get on with living their lives and enjoying themselves.

tiff

I'm not so sure, if it lasts 10 years then I dont think most people will go back to spending and borrowing like they have done. Too many people will have been through a terrible time.

whathavewedone

I don't actually think it will last ten years tbh but lessons never got learned in previous recessions and I don't think it will be any different this time.

Some people are naturally thrifty and some are natural spendthrifts. The natural spendthrifts will revert to type as soon as they are in a position to do so. Just as tightwads are tight no matter how much money they have or what state the economy is in. I know some very wealthy people who disappear to the loo or decide that they must leave NOW to get home in time to put their children to bed - their children don't seem to have a routine as such - sometimes they go to bed at 7, 8, 9, 10 or 11pm - depends on when it's dad's turn to get a round in really.

I'll be honest - I'm a natural spendthrift who is currently being thrifty. I'm reluctantly not dipping into my savings for a boob job but as soon as all this over it'll be bye bye wonderbra. Assuming I haven't needed my savings to get out of negative equity/to survive high interest rates that is.

baileysbattlebus

tiff wrote: »

I'm not so sure, if it lasts 10 years then I dont think most people will go back to spending and borrowing like they have done. Too many people will have been through a terrible time.

People have short memories, and the generation who will grow up through this recession will not really remember it as being particularly difficult - mine were children/young teens during the last recession - adults now - they don't remember any hardships or cutbacks, they didn't have to make the cutbacks - we did and always tried to ensure the children suffered the least. As far as they were concerned they went to school every day, they got birthday and Christmas presents, they got fed when they were hungry etc.

It will be same this time - and in 10 years time or however long it takes young people won't remember this - it will mean nothing to them.

As in the case of our own children, the rolled eyes as they help you up off the floor when they tell you how much they are borrowing. Like all young people, they know everything and we ofcourse only being parents know nothing.

It will happen again - it might take a while - but happen it will.

whathavewedone

Spot on.

I was a kid during the 1970s and don't remember much about the strikes except my parents moaning about it. The powercuts seemed fun, eating sandwiches by candlelight and so on. They told me never to vote labour but I did. When you're 18 ten years ago seems a lot longer ago than when you're 38.

I was a young adult during the last recession but it didn't really affect me even though I was unemployed for 6 months of it. I'd only just graduated and I'd been living in dumps for the past 3 years as a student anyway.

I remember 10 years of house price falls/house price going nowheres so I was aware all that could and probably would happen again but it didn't stop me from buying during the boom. I simply wasn't in a position to buy at the bottom last time round and the boom went on for so long I got fed up with waiting.

It will all happen again and again and again. We might not see such large booms and busts in our lifetimes but we will see booms and busts of that I'm certain.

Jennifer_Jane

CLAPTON wrote: »

There is of course a very real downside in a recession but then there were very real benefits in the boom years.

However, if we want to get rid of the bust periods then probably were need to get rid of the booms... would those poor people you mention above be better off if they never benefited from the booms.

Personally I think that boom and bust is better than no boom... obviously I would like only steady growth (no boom and bust.. who said that now?) but we don't know how to do that.
Sadly the Chinese people suffered awfully from the appalling policies of the communists before the current boom.

So I don't really see the current situation as 'bad' ..only inevitable

Ah yes, Clapton, but the chances are that the poor people did not benefit to the extent of the rich - we know that globally and in the UK, that the difference between rich and poor has widened, and I am sure the poor suffer more in recessions - they don't have the cushion.

Jen
x

Jennifer_Jane

Cleaver wrote: »

I was being sarcastic Jen, sorry. Maybe I should start using smileys. Or have a signature like the mortgage advisors do:

I am a Sarcastic B*stard.

You should note that this site doesn't check my status as a Sarcastic B*stard, so you need to take my word for it. This signature is here as I follow MSE's Sarcastic B*stard Code of Conduct. Any posts on here should be read as sarcasm unless somehow otherwise indicated.

Love this, Cleaver!