Even though there is much that is so fundamentally wrong with elements of the financial system - like massive investment in the pure nothing of credit default swaps by the wizards in charge, the dislocation from going spending with paying it off, the planning to sell a million houses to people who can't afford them - do we really have to be so glum about it:
There will be blood, in the sense that a crisis of this magnitude is bound to increase political as well as economic [conflict]. It is bound to destabilize some countries. It will cause civil wars to break out, that have been dormant. It will topple governments that were moderate and bring in governments that are extreme. These things are pretty predictable. The question is whether the general destabilization, the return of, if you like, political risk, ultimately leads to something really big in the realm of geopolitics.
Oh, goodie. Oh, goodie goodie goodie. Thanks for that - no really, thanks. Even Mr. Flaherty is a little ray of sunshine compared to that: "I expect that the numbers are going to continue to deteriorate for the time being". So, on the way down what is going to fail that is going to affect us most? Skipping a few steps, what does it take for example to make the internet start to wobble structurally? Without funds to maintain the failed rebuilding, does Iraq flip? Or does just saying these things make them come true? Could not focusing on the recovery to come one day make it more distant? Or is that silly - like the fear of flying being necessary to keep the plane in the air?
Comments
Hans - February 24, 2009 9:13 AM
I think the doom merchant punditocracy are angry that the general public are not sufficiently downtrodden by the financial crisis, that we are not in a state of civil unrest, that random distraught consumers haven't launched an arsenal of desparate acts, that more beggars aren't abasing themselves even further than they already are for hand-outs, that failed and failing states around the world aren't collapsing into total chaos. Our aloofness to the crisis and resilience in the face of *their* bad news annoys them. I think this making them pile on even worse. I think this speaks to how little the "world of finance" is connected to the real lives of real people (as the world of politics is unconnected to the life of the average voter) but also how inured we are to financial crises. This will be the third recession I've seen in my life time and I survived the other two.
TRex - February 24, 2009 10:18 AM
Recession? I know this is a Canadian political blog but jeez!
Compared to North America most places in the world never had it very good anyway (at least not for very long), so it is a case of "seen that movie before"!
That doesn't mean that the collapse of ones government and all the turmoil that entails, a 15% to 25% reduction in firefighters, police, hospital services etc doesn't scare folks, especially when combined with an increase in prices for what is left of basic services and food to really drive home the fact that you now take home 15% to 50% less assuming you are still working at all and you haven’t defaulted on that home mortgage or car loan that you were approved for. And then there is the increase in violent crime and the stress on a normal family situation which will echo through the generation coming up! Most of the world does not have the infrastructure to deal with this after things return to some semblance of normalcy. Blood in the streets? Drama queen comes to mind but don’t ignore the long, long term affects.
I doubt that Canada will see the activism that Iceland, Latvia and Ireland have (short list). But then most of them don’t read blogs anyway and Russian citizens are extremely adept at dealing with the reality on the ground and ignoring numbers meant to bolster a certain group’s position. I lived in Alberta in 1980 when the interest rate jumped to 20.75% and the house keys were being thrown on the sidewalk in front of the banks. Everyone came through that without blood in the streets because we have a civilized society with good infrastructure.
This is a huge set back for everyone and how long it takes for the ripples to hit the shores of complacency, well, lets just say it is a small world nowadays.
Alan - February 24, 2009 10:55 AM
Well, first, let me commend you for the implication that "this is a Canadian political blog" must mean it is half-baked and angst ridden claptrap. I blush in the face of such honesty.
I was being half-rhetorical and half-angstity on those questions. But you and Hans are right. We have seen this movie, too, and I do recall the wonder of 20% interest on the bank account just when the student loan grants hit them. Every friday there was free beer money!
TRex - February 24, 2009 1:02 PM
Chill pill!
I do a Google search for "top 25 Canadian Political Blogs" and there you are. It's more fun this way.
But I meant what I said. Most of the world is used to crisis.
Jay Currie - February 24, 2009 3:45 PM
I suspect that the reason why there is not "blood in the streets" is that the two decade credit binge has left the vast majority of people with a remarkable amount of "stuff" to play with at home. And while some people will have unmanagable credit card balances a lot will not. And while some people will lose their jobs or be "cut back" (my own position) the vast majority will still have income.
This is nasty but it is a long way from disaster. And, not withstanding Ferguson's rather pessimistic comments about Canada, we still have solid banks and a debt to GDP ratio the envy of the G7. Riots, civil war, regional conflict and world war are not things people with a lot of stuff and some income want to engage in.
So we won't.