Skip to main content

Big Money Hoarders and the Crisis

The current economic crisis is frequently blamed on over-borrowing by states, banks and citizens. I suggest another angle: the source of the problem is excessive accumulation of wealth, by some countries such as China and large financial groups, such as pension and hedge funds.

Think about it. Money had become cheap, very cheap, in recent years. The hoarders needed to put the money to 'work', they had run out of productive businesses to invest on, so the competition between these hoarders intensified, causing drops in the cost of money and enticing many countries and a significant part of the population to take debt as a normal fact of life.

Money is still cheap, suggesting that the hoarders still have huge reserves, but they are also worried that they might not be repaid in full, so they throw s#*t into the fan by forcing austerity measures that should ensure that they get paid before anyone else.

Borrowers had choices on who to borrow from while money was cheap. Once they became highly dependent on loans, their ability to repay is put in question and the borrower runs out of options. Then the prey is ready: It is time to raise interest rates, force painful readjustments and take over the assets of these debtors, whether they are homes or national energy grids.

The next problem is that these hoarders are also herd followers and they don't realise that in their drive to recoup the money, they are chocking the economies that were supposed to provide them with return on their investment. I have no doubt that we are heading towards a truly proper meltdown.

People in the streets know that there is something wrong, but all they can do is blame the governments and banks, but these were just fools in this game. The big culprits are the handlers of these huge reserves. These reserves need to be cut down somehow. The global economy can't produce enough to allow people a decent standard of living while entertaining massive loans and interest repayments.

The big losers will be the pension and hedge funds. Economies that depend on the financial services sectors such as the UK are likely to need to reinvent themselves. Countries and people will need to relearn to earn before they spend.

As we stand today, the hoarders remain as the last 'sacred cows', but once borrowers truly run out of options, they will finally feel the pain.

Comments

Popular posts from this blog

Irish Education is Failing Our Kids

Screenshot of the drawing made during the video RSA Animate - Changing Education Paradigms (YouTube) My heart shrinks a little bit every day when I drop my kids to school, specially the younger ones. It shrinks because I know that their experience ought to be so much better than it is. While some benefits exist in how education is delivered today, much damage is also being caused, and even worse, the knowledge exists about how to improve things, but teachers and the catholic church control of education in Ireland are incredibly powerful points of resistance to change. Take my four year old daughter as an example. She started school last September. Within three weeks, she could recognize three letters of the alphabet, but she had already been taught to pray, word by word at least two prayers. My 13 year old, who is facing some challenges in secondary school recently was offered support. He had to give up one normal class during the week to meet a support teacher. The option...

History: national baggage or an asset?

I read recently a suggestion that countries that experience severe drops in population levels due to traumatic events might never recover psychologically. Today Ireland's population remains 25% lower than what it was before the famine (from 8 to 6 million in the whole island). Ireland is a country that re-lives its history everyday. The almost genetically ingrained memories of pain from the great famine and the long process of securing independence are obvious on a daily basis. Much progress and healing has occurred in recent years, but it doesn't take much to raise the old resentment. Even apparently innocuous mistakes by UK press such as naming a famous Irish person as British (They actually tend to claim Irish actors and athletes as theirs in the good days, but remember correctly the person's origin when they are associated with any bad news) can trigger highly protective feelings. Northern Ireland has one of the most fractured societies in the world, and intoler...

Effective tax rates: Taxing times | The Economist

The Economist come to the rescue! I had endless discussions with people in Ireland about how we get far less value for money on our taxes than the Swedes. My argumentation was based on comparing notes with a Swede before the crisis started on a similar gross salary to mine and similar 'overheads', like car, children, mortgage, and so on. The finding was that although the 'take home' salary was slightly higher in Ireland, the disposable income was far lower after paying for child care, road tax, insurance and other transport costs. Since 2007 the comparison makes Sweden look even better. The table below doesn't show Ireland, but puts Sweden in a good light that might surprise some people. Effective tax rates: Taxing times | The Economist : 'via Blog this'