The Road To Depression

This morning the stock markets of the world tumbled yet again because of "worries about the debt crisis". This worry goes on and on because many meetings of political leaders never resolve anything. Last Friday there was a meeting in Poland of European finance ministers along with Tim Geithner, the US treasury secretary. The only conclusions reached was that they should put off a decision on bailing out Greece until ................. sometime in the future - as the old tin can went rattling down the road and into the long grass. Geithner suggested that this was not good enough but the Europeans were inclined to suggest that he get back to America and sort out the problems there. The whole world is drowning in debt and it seems that the only people oblivious to the fact that we are tottering on the edge of the abyss are the politicians and the bankers, the people primarily responsible for getting us into this mess. The bankers continue to pay themselves awesome amounts of money as banks rake in more and more from charges levied on everyone who uses their services from small current account holders to big companies arranging cooperate A&Ms. The problems are serious. Last week it was revealed that UBS, the Swiss banking group, had lost $2 billion as a result of uncontrolled activities of a "rogue trader". This "rogue trader", Kweku Adoboli, a derivatives trader seems to have been playing around with what are called virtual ETFs [exchange traded funds], an area of fog-bound betting that serves no real purpose, except to allow the betting of large sums of money on [usually] currency movements. Every time there is a disaster like this - and today the estimated loss has been boosted to $2.3 billion - it is a "rogue trader". No it is not; it is a trader who was very greedy who cocked it up. There will be lots of others at it and everyone just hopes nothing goes wrong. Mr Adoboli is 31 years old and just a trader sitting at a computer desk, who last year was paid £200,000 in salary and £400,000 in bonuses. But clearly this bonkers level of remuneration was not enough, he wanted more and the bank has caught the hit. Should we be sympathetic? To whom? The UBS bank has been in deep water before and has been telling the world that it has cleaned up its systems to prevent this unregulated gambling from occurring. Clearly this was untrue. It is, perhaps, a good thing that this disaster happened when the Vickers Report had just been published and that this was recommending that the big banks - too big to fail - should have the investment arms separated from the high street operations so that we did not have to bail out the investment banks if they hit the rocks. The government has accepted the recommendations but is prepared to allow the banks 8 years to complete the changes. This should give them enough time to wriggle off the hook and ensure that we continue to be the long stop for every bit of manoeuvring and gambling that goes wrong.

Coming back to the international political scene, we have to ask when will our leaders act? Never in the recent times have we had such a collection, worldwide, of inept, uncharismatic, second-rate leaders. They don't know what to do and every single one of them is worried only by the next by-election that may be a bad result for their various political parties. There is no leadership from this collection of never men and women. They swan around the world from one conference to the next and talk a lot but do nothing. Some of the gatherings are so immense that the possibility of a result must be zero from day one. Fundamentally, they do not seem to see that the whole of the capitalist system is collapsing. Greece will default; that is certain. But how many other countries will go down the drain? The Euro Zone relies on Germany for bail outs and the German public does not want to carry on chucking money at incompetent, corrupt and terminally basket case economies. Euro politicians do not want to admit that the Euro cannot carry on unless there is massive restructuring - and a massive bail out fund. The USA is bedevilled by a weak president and a Republican Party dominated by naive, self-confident, fundamentalist religious loonies, whom I would not trust to fry an egg. America has immense private debt and a public debt of $14.4 trillion and still rising. Whole towns and cities are collapsing - look at Detroit - unemployment is 10% and 40 million Americans live below the poverty line and have no health insurance. Much government money was spent on bailing out the financial system but vast amounts have been spent on pointless wars.

The situation is desperate and serious and I just hope that our politicians and bureaucrats realise it before it is too late and we disappear into a new dark age of depression that will make the 1930s look like a little local difficulty.

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