Friday, September 16, 2011

Too Big To Fail

“Too big to fail” is probably the scariest movie ever made. It is about those faithful months of August and September 2008, when mortgage companies folded and banks needed to be bailed out. The movie “Too Big To Fail”, made for HBO, identifies how as a result, ten banks were identified as simply too big to fail, for if they did, they would bring down not just the entire American financial system, but the world economy as a whole. They literally hold the fate of this world in their hand… and
they know it.

As interest in the 2012 phenomenon began to rise, I began to look for what social changes were occurring and were forecast to occur in upcoming years. In one Google alert, an economic wizard – before the collapse of 2008 – predicted a world economic crisis for 2012. When the 2008 crisis happened, commentators congratulated him on predicting it, arguing that he did however get the year wrong. His reply: “no I didn’t.”

As the end credits of “Too Big To Fail” roll, it is clear that TARP, the government plan to solidify American markets, was a plaster on a broken leg. That the government realized certain incredibly draconian and major measures had to happen, as otherwise the world economy would collapse.

When you analyze the world economy, we all know by now that it is built on trust. But it is also built on thin air. The world economy has truly not been stimulated since the end of the Cold War, i.e. 1990-ish. Before, growth was largely the result of defense expenditure. Peace, however, all of a sudden meant less spending on the staple ingredient of a world economy based on fear. So a series of new economic motors were advertised, from the dot com bubble, to the housing market, in efforts to push the markets ever upwards. In between, 9/11 was used to even bring out the notion that security systems and like would help boost and inject the economy. Nothing worked… In medical terms, the world economy’s heart has stopped beating a long time ago and all attempts to revive the patient have failed.

So when the housing market collapsed, it became apparent just how grand the self-delusions – and greed – of the financial sector truly were. And because this was not just a folie à deux, but a mass hallucination, it not only brought down various parts of the financial industry, but almost brought down the entire system.

So we know that in the aftermath of this crisis, the banks for a period of time didn’t lend to customers, as the US government had hoped they would do with the money that was given to them. But as that hurdle is now apparently smoothed out, we all seem to live in the belief that the financial sector is once again stable. But is it? But is the global economy largely not surviving because there is little economic news to report these days? One
might almost consider it to be a conspiracy of silence, in which the silence itself is there to guarantee – or enable, or maybe allow – the world economy to buy time, until “something” will happen that will re-inject some true spine in the markets. But how can this be when everywhere individuals, like American homeowners who continue to be foreclosed, have no faith in the future?

So the notion that the greatest economic collapse is still to happen in 2012 is not such a fantasy. And what 2011 is showing, is that whereas governments were still pretty robust in 2008, by 2012, this is definitely no longer to be taken for granted. To make matters worse: “world oil” largely moved from dollars to Euros in the last decade. That seemed a wise move, as the American economy seemed to slow down, while Europe seemed a cauldron of vitality. But in 2011, several European states are teetering on the brink of bankruptcy, and some of them are not small economies. In August 2011, Germany saw 0.1% growth, which largely resulted in an emergency summit between French president Sarkozy and German Chancellor Merkel, as this was potentially apocalyptic news for the survival of the Euro and the Union.

Creating an economy on a continent that does not have true political union was risky at best, but it might become the death of the world economy; for if banks cannot be bailed out by governments, some of whom are close to defaulting on their own loans, the end of the world as we know it, is truly near. The collapse of this house of card will occur at some point. And it might not be long. And it might not necessarily be a bad thing. Why? Because it is not real. We are shackled to a system that fails, because it was never truly real and right now, we are keeping it alive, because somehow we feel it is vital. But if history has taught us anything, it is that it simply is not so.
When the Berlin Wall fell, one television reporter asked a commentator whether this showed that capitalism had won over communism. He answered that the Soviet bloc had never been a true communist regime, but he added that it merely showed that communism seemed to have more flaws than capitalism, implying dire times were ahead of that too. He too, was proven to be right, though it took almost twenty years before that became apparent.

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