Here's a thought.
If I'm wrong on this, then I apologise, but as I see it...

1. Banks lend to people who can't afford the repayments.
2. Banks tie these loans up in securities and derivatives financed by bank debts leveraged against other unsecured assets.
3. Traders realise something isn't quite right when the value of bonds, derivatives and securites is more than the GDP of the WHOLE FUCKING WORLD.
4. Banks panic and stop lending to each other, governments, businesses and people to cover their arses.
5. Banks realise that the debt hole is bigger than the money they have to fill it.
6. Businesses go down the shitter.
7. People lose jobs but on the flipside are encourage to spend more to stop other people losing their jobs.
8. Taxes paid by people who've just been told to fuck off are given to the banks who caused the fuck up in the first place.
9. Unemployment goes up, so taxes are lost, therefore the goverment has to borrow more.
10. All the while share prices are plummeting, causing our pensions (yes, you and me, not Mildred at 42) to evaporate before our eyes.
11. The paradox of thrift means that we're better off trying to make the most of a collapsing market rather than save our money/stuff it in our mattress.
12. Further to number 11, our money's worthless because it's down against the dollar and the euro, meaning no more booze cruises, cheap holidays, etc.
13. Council taxes are going up because half of them invested their money in Icelandic banks which have now fallen to bits.
14. ...and they've called this a Credit Crunch? WHAT THE FUCK?

I mean, it's a bit of a blase statement to make about what is basically a perfect example of how capitalism will eventually come to bite us in the ass.

I'm still waiting for Adam Smith's 'Invisible Hand' to come back and steer us on the right course.

Otherwise, I'm appreciating the wonder of Smartprice chopped tomatoes, mince and 101 different ways of using a carrot.

See you when it all blows over.

P.S. Anyone who watched Bremner Bird And Fortune's Silly Money series will get a real insight into what's going on, along with a bonus comedy element too. Oh, and C4's Ascent of Money was a brilliant overview of how we got into this mess in the first place...
(scentless_apprentice takes two bottles into the shower!, Fri 23 Jan 2009, 9:54, 14 replies)

*clicks*
To me (I'd loosely class myself as an anarcho-socialist-communist, or something), this represents the end of capitalism, as you say, and in my mind is the only logical conclusion of the way that the world was operating.

So why does nearly everyone (and everyone in charge) believe the only solution is MOAR CAPITALISM!!11!1!!

???

Up the revolution I say. Let's start killing the fuckers and burying them in a big pit, they won't be able to fuck the world up any more then.
(Son of Sam-i-am We're all as mad as hatters here, Fri 23 Jan 2009, 9:58, closed)

Excellent idea.
I believe the historical models you need to study are the Soviet Union, Communist China, the Pol Pot regime in Cambodia, North Korea, ...
(haberman is singing in the changes, Fri 23 Jan 2009, 11:07, closed)

That's as good an explaination as I've seen so far.
Very well put.

Moreover however, the government has borrowed against future tax receipts. In three years time our taxes will go through the roof - remember that even if the "credit crunch" didn't happen, the government was spending much more than its means by a considerable amount.

Expect to see massive increases in "stealth taxes" over the next few years while Basic Rate income tax, National Insurance and VAT will be hiked massively too.

Gordon Brown has borrowed ten times the amount we borrowed to help finance World War II, which we only finished paying off six years ago...
(Bicycle Repairman "you're also a bit of a wanker", Fri 23 Jan 2009, 10:03, closed)

Yep
And as pointed out by a rather good article in the Grauniad a few weeks ago, keep an eagle eye out for the phrase 'quantitative easing'

Translated out of weasel words, this means 'printing more money'. Which in my opinion is comparable to trying to extinguish a fire with a gallon of petrol.
(Son of Sam-i-am We're all as mad as hatters here, Fri 23 Jan 2009, 10:06, closed)

The most famous time that a massive money print run happened...
Was in the Weimar Republic of Germany, in 1923.

Look what happened there.
(scentless_apprentice takes two bottles into the shower!, Fri 23 Jan 2009, 10:13, closed)

See also
Zimbabwe, and their one trillion notes or whatever they've just brought out.
(Son of Sam-i-am We're all as mad as hatters here, Fri 23 Jan 2009, 10:18, closed)

i dont think
this will blow over...
( tickle I was away, Fri 23 Jan 2009, 10:07, closed)

Have a click
For a concise explanation, and namecheck for Bremner, Bird and Fortune, who always help me get my head round stuff..

My Dad wants to know why the Government couldn't guarantee everyone's savings, up to the amount they put in (their "Stake" if you will) and after that... let these greedy fuckers go to the wall.. It's either Free-Market or it isn't. If the Government wanted to lend money to get businesses through, why didn't they lend it to the businesses, and stop propping these people up?

Makes me want to weep when I consider that we used to have huge industries, that the government refused to prop up with even tiny sums of money, compared to these huge "Golden Lifebelts"
(Beer Elf Thought this was like a campfire, anyhow, on, Fri 23 Jan 2009, 10:25, closed)

where...
...is the f***ing "undo" button?

It should be possible to unpick this mess. But that would mean that whoever profited (assuming we regard the global economy as a zero-sum equation) would have to give back the eleventy-squilllion dollar bonuses.

So instead they dress it up in fancy terms and pretend like a bunch of money just vanished into thin air from their vaults - oh my!

(As an aside, when we were kids we played shops. And a bank, too. We figured it out *really* fast that a banks should NOT do wierd shit like lend to another bank, only for second bank to invest back in first, giving the first bank more capital to lend. And that was just with actual play money, no fractional reserve chicanery.)

edit: Also, when will charges be brought? People get sent down for much less than this, simply wearing a suit and earning lots is not an immunity from personal and ethical responsibility.
(The Incredible Sulk Finally remembered his password on, Fri 23 Jan 2009, 10:30, closed)

Interesting facts for the anti-capitalists
The US Mortgage Banks who lent umpteen billions to people who couldn't repay were in forced to do so by the US government, as part of a scheme to get low-paid workers on the property ladder.

The banks didn't want to do this, but the US government made it illegal not to put a certain percentage of their borrowings into the sub-prime bracket. In exchange, the government underwrote the debt via Fannie May and Freddie Mac...

...who promptly ran out of money and had to be bailed out by Joe Taxpayer when it turned out that the people the banks didn't want to lend to because they couldn't pay, er, couldn't pay.

Early in the 2000s, Citibank were subject to a class action lawsuit for not lending enough sub-prime money, as mandated by the law. The name of the dynamic young lawyer leading the suit?

Barack Obama

Who now reckons he can sort out this mess. Good luck with that.

So #1 on your list was caused directly by the US government interfering in the market for reasons of wealth redistribution:

Otherwise known as socialism.

And the clusterfuck you describe took place. Once it was clear the US government was underwriting sub-prime debt, every bank in the world decided to get themselves some of that and bought up the supposedly underwritten debt. European banks used this supposedly 'safe' debt to hedge against sub-prime lending over here as well, and when the US government's underwriting scheme proved to be worthless they got stung for billions.

Messing with the market is what will come to bite you in the ass.
(Axeman Jim, Fri 23 Jan 2009, 11:48, closed)

Ooh, this could open a can of worms...
I see what you're saying but I also think that this doesn't excuse the situation.

Yes, I like to think of myself as being a socialist, but I am also aware that Adam Smith's original prinicples were the right ones, and the capitalism that we currently see today isn't the one that the Scottish Economic Genius wished for.

Someone's fucked up at the end of the day, and we're all paying the price.
(scentless_apprentice takes two bottles into the shower!, Fri 23 Jan 2009, 11:59, closed)

Of course
the blame is to be found all over, and the banks were as stupid as everyone else. But the point is that this situation was caused by socialist actions just as much as capitalist ones.

And anyway, as a few people have said, I'd rather live in a capitalist country where some people can win than a socialist/communist one where everyone is guaranteed to lose.
(Axeman Jim, Fri 23 Jan 2009, 12:12, closed)

This^^
Depends on your definition. In what way is encouraging property ownership a socialist principle? Dunno if Karl Marx may have mentioned it in "Capital" his groundshaking work on the subject..

Nope, what you had there was the government trying to increase property ownership in the hopes that it a) Kept more of the population prepared to stick at a job they hated for minimum wage in order to keep up their payments, and b) Gave them some collateral to borrow further against, and/or use to consolidate existing debt, hence take the fear out of credit ("We'll always have the house to fall back on") In it's effects it could be likened to the "Right to Buy" scheme for public housing in the UK, because it was set up for the same purpose. IE to control people's behaviour, and got them used to spending more than they earned and being in debt. I'd also like to give any UK city centre on a Friday night as evidence of what can happen if people can't afford to buy houses and hence have a larger disposable income..
(Beer Elf Thought this was like a campfire, anyhow, on, Fri 23 Jan 2009, 12:48, closed)

Whoah
I wasn't talking about Marxism, I was talking about redistributive Socialism, which an entirely different outlook, which acknowledges private property but seeks to shuffle it around according to some big economic plan (pure Marxism does away with monetary exchange value altogether).

And in a way we agree - if governments didn't fiddle with and distort the market in an effort to push spending above sustainable levels, then we wouldn't be in this mess (or at least in such a big one).

Ah, this is just like being a student again...
(Axeman Jim, Fri 23 Jan 2009, 18:36, closed)