When we look at world history we can see that the world encountered many crisis, one more bad than the other, one being on an economical part, another on the human side, another concerning the environment.
Some crisis brought the country were people were living in such danger that it either broke down and became part of an other country or it grew stronger and became more united.
In all case we see that people were confronted with serious matters and had to dare to take stances. The urgent situation demanded quick but firm solutions. though to get to some good solutions it sometimes could take more years even some decennia, because people did not take their pick and act boldly.
Often we came into situations where no one wanted to make the necessary decision to solve the problem quickly. Often we could see that personal interests got priority. though matters could be of general interest, politicians often were more concerned about the political consequences and their own good. Nature often got it in the neck. Also the fragile in our society had to pay for it. The politicians their actions more than once became counter productive and did not solve the matter at the best interest.
People need to be willing to make hard choices, while keeping in mind what is good for the community. Therefore there should be a social awareness, which has to be fostered but also brought into the mind of the growing child. To raise such a social consciousness people do have to take up the right attitude and form such an awareness in the upbringing. The society has to take care that everybody receives the opportunity to become well-bred and is nicely brought up.
The last few years we saw an other sort crises than the Belgian political crises of which we had so many since 1830. The 1920′s and 1930′s seemed to have their seeds growing in the 2° millennium. While lawmakers debated the debt ceiling and consumer confidence dropped, more homeowners were having a harder time making their mortgage payments. The strange thing this time is that normally you would think, for instance, housing prices and unemployment having a big influence on delinquency, though the figures given by the unemployement agencies RVA and VDAB looked not so bad. Unemployment was steady during the last few months even we had the General Motors ‘debacle’.
More and more people could or can not fulfil their duties, paying for electricity, petrol, telephone, television or housing. In Belgium we did not face such a mortgages problem as in the United Sates of America. Here we did not find so many people holding a second mortgage to pay of the first one. In our country it surely was not as some think it was in the US. But even there it was not just about bad loans any more.
Some assume that debt crises are about as natural as earthquakes, but this time there is something different — and possibly more dangerous. Certainly for our small countries who are all linked together and this time in a network of debts, as Bill Marsh recently illustrated in the New York Times with a beautiful piece of graphic art. Greece and Italy are prominent and form the sword of Damocles above the Euro. We did do our best already to help Ireland where after such a bad time everything seemed so wonderfully well. It even looked the new paradise of Europe for a while. But what clearly brought it down is the uncareful way of handling loans. Portugal and Spain lurk ominously nearby. France and Germany seem exposed, too, as does the U.S.
One country is pulled down by an other because their financial arrangements between each other do not seem strong enough to hold. The banks and several companies constructed complicated tax evasion systems and hidden networks that buy and sell unregulated credit-default swaps.
These undisclosed ties matter a lot. They were the primary reason the U.S. government needed to intervene in 2008 to prevent the collapse of insurance giant American International Group Inc. Ignoring the looming trouble with sub prime mortgages, AIG had blithely sold CDS contracts insuring mortgage-backed securities to Goldman Sachs Group Inc., Societe Generale SA, Deutsche Bank AG and other firms. Suddenly, AIG was potentially on the hook for almost half a trillion dollars in payments. Through CDS contracts, AIG’s failure could have spread distress throughout the global financial system.
The American Bank-crises pulled us all with the Icelandic affair in the well of doom. Now came to light that those bankers and money gurus had taken too much risk. The plenty-fold of risk sharing made it easy for distress to spread like a virus.
When the connectivity in a network of risk-sharing connections is relatively low, according to Battiston and colleagues. If one bank suddenly goes bankrupt, the repercussions aren’t so serious. In such an instance the failure could cause problems for a few other institutions but wouldn’t generally propagate too far. In such a case, the risk-sharing could even be beneficial, just as the economics textbooks say it should be. Contracts like credit-default swaps can indeed bring benefits.
What we see and hear today (hear Mr. J.L. De Haene at the commission about Dexia) those in charge of the banks understating risk and overstating true earnings. For a while, financiers showed high profits, justifying rising stock prices for their companies and large bonuses for their top executives. But these profits were never properly adjusted for what will actually materialize over five to 10 years, meaning that they understate risk and overstate true earnings.
Several people laughed with the Icelandic situation. The Icelandic attempt to run a country like a hedge fund may make you laugh or cry. But the unfortunate truth is that the U.S. and many European Union countries did something similar by allowing or encouraging parts of the financial sector to take on too much risk. This manifested itself in excessive lending to some combination of governments, real-estate developers and households as such that we now have to face a severe recession.
We may not forget that the true economic damages are much larger than our government wants us to believe. We should take into account all those families which have to live on security money, either a pre-pension or unemployment benefit. They now feel the recession in their purse and cannot spend as much so as a consequence of being able to consume less we have to face a lower economic growth, more loss of jobs and more disruption to people’s lives. The worst thing is, but we do not have a choice, that part of the higher debt will be shoved onto future generations, hoping that they will be richer, or perhaps just luckier, than we are. But we see the first coming generations being poorer than the first post war generation of the 20th century.
We hear many countries looking for taxing the people more, though in certain countries they do have to pay already a lot of tax. In Belgium every labourer has to work first more than half a year before he can get one Eurocent for himself. As usual people at the lower end of the income and wealth distribution are squeezed after major financial crises. Squeezing the poor makes them more fragile and at the end they’ll going the community more than the gains the politicians are aiming at for the short time.
Many middle-class baby-boomers have to face a lesser income because they became redundant or are put on retirement. they become frustrated because their coin dropped that people are not really valued for what they have done and for what they still could do. They are not used to bring their knowledge on to the younger generation. Not having enough money for retirement has become a top financial concern. In what was supposed to be the country of dreams and of the rich, this was up from 53 percent a decade ago and raised a red flag for U.S. policymakers concerned about distress and downward mobility in the middle class. As the first members of the post World War Two baby boom generation turned 65 this year, the United States and many Western countries stood on the doorstep of what many experts see as a looming retirement crisis.
We do not have to be smart to see that baby-boomers are members of the first generation since the 1930s who will be worse off in their older years than their parents.
“This is the first time since the Great Depression we are looking at poverty rates increasing among the elderly.” says Teresa Ghilarducci, a retirement specialist and economics professor at the New School of Social Research in New York.
The problem with many people in retirement is that they as good house-fathers had a lot of savings placed in the hands of people they thought they could trust. They did not grave for riches but laid something for a rainy day. But now they were sold for a mere song by their banks. Those who have no pension or retirement savings plan, and soaring medical costs shall have them struggling financially as they hurtle toward what once might have been a comfortable retirement.
Leading sociologists have shown that societies are far more likely to break down when they’re overloaded by converging stresses; for example, rapid population growth, resources depletion, and economic decline. As the quality and quantity of stresses increase society tends to respond by making its internal institutions more complex. Today we get everything at once on our back. There is not only the financial disaster, but also climatic and environmental pollution; depletion of natural resources; unsustainable population growth; accelerated urban expansion, etc..
A good thing is that some people are coming onto the streets and do react. Because the problem is that too many people just let it come over them. They are not interested. They are willing to complain and nag or go on saying it’s worse than bad, it’s appalling, instead taking the bull by the horns.
It is more than time that we grasp the nettle. Disruptive times have often been the catalyst for the implementation of radical change. With a fresh mind we can look positively about how we can make the best out of this situation and change direction. The breakthrough scenario requires us to be positive about using the disruptions as opportunities for growth. Such moments spur us into re-thinking our current lifestyles, our levels of consumerism, credit/debt, wastefulness, and extravagant excess. It also triggers us to recognize our dependencies, our complacencies, and those everyday things we have taken for granted.
According to The American Psychological Association there are ten ways to build resilience:
- Make connections
- Avoiding seeing crisis as insurmountable problems
- Accept that change is a part of living
- Move toward your goals
- Take decisive action
- Look for opportunities for self-discovery
- Nurture a positive view
- Maintain a hopeful outlook
- Take care of yourself
- Additional ways of strengthening resilience may be helpful
keramella goes deeper into this on the University of Missouri students blogging about communication. She gives a list of six important steps in maintaining resilience. You remember how I did find “Values” so important. Our community has to gauge the value of the things around us. The have to express their appreciation for the whole world and may not concentrate on the financial world only. In that world the people do have to set as the norm certain “Ethics” respecting all parts of the creation (earth, plant, animal, human). They should have a positive “Sense of standards” and be careful not to come to a blurring of “Moral standards”.
Creating a “Secure base” shall make more people feel happy and content. Creating a good atmosphere of understanding shall also create a futile ground for better “Social Competencies” and easier making “Friendships”. And when we can have a fertile soil we can foster prolific spirits and a good “Education”. In a good environment with positive values “Talent and Interests” can be stimulated to work together for a better future.
By having these six domains, a community should be able to come together and recover.
- Credit-Default Swap Risk Bomb Is Wired to Explode: Mark Buchanan
- Middle Class Pays for Financial Market Mistakes: Simon Johnson
- Retirement Crisis Closes In On Baby Boomers
- Our Social Crises — From Breakdown to Breakthrough by Kingsley Dennis, Ph.D.
- How AIG Became Too Big to Fail (time.com)
But the revelations of the AIG bonuses, like nothing else, seemed to finally tip the mounting public furor over corporate malpractice into a full-scale rebellion. Yet Geithner, embarrassed for discovering the bonuses so late, plans to dock AIG that much out of the next $30 billion in bailout funding when it is delivered — which amounts to a mere 0.1% of the total AIG has received.
- Dish Check Update: Who Caused The Financial Crisis? (andrewsullivan.thedailybeast.com)
few factors to consider:
1) where was the real scale and risk created in the chain?
2) where was the real impetus – who was creating/accelerating the “pull?”
3) who should have known better?
I think the answers to these questions point squarely at Wall Street and AIG, and to a lesser extent the ratings agencies. Sub-prime lenders were dirtbag cheats, and many high-risk borrowers were foolishly irresponsible, but that doesn’t make them responsible for the collapse, just among those morally at fault – a subtle yet important distinction.
- How US Banks Are Lying About Their European Exposure; Or How Bilateral Netting Ends With A Bang, Not A Whimper (zerohedge.com)
luckily MF was not in the business of writing CDS on European banks or else all hell would be breaking loose right now
as the AIG debacle demonstrated, once the chain of bilateral netting breaks, whether due to the default of one AIG, one Dexia, one French or Italian bank, or whoever, absent an immediately government bailout and nationalization, which has one purpose and one purpose alone: to onboard the protection written to the nationalizing government, then GROSS BECOMES NET! This also means that should things in Europe take a turn for the worst, Morgan Stanley’s $39 billion in gross exposure really is.. $39 billion in gross exposure, as we have been claiming since September 22.
if Italy falls, Europe falls, and with it fall not only all the largely undercapitalized French banks (all of them), but the US banks that have not tens, but hundreds of billions of gross CDS exposure facing them, which at that point will be perfectly unhedged as all their transatlantic counterparties will be in the same boat as MF Global.
- Why Crises Mount, Persist (online.wsj.com)
Europe’s delays in managing Greece’s insolvency have led markets to question the sovereign debts of half the euro zone. Taxpayers are going to take a hit.
- AIG to Sue Bank of America: Read the Fine Print (247wallst.com)
AIG was the largest insurance company in the world when it bought mortgage-backed securities from Bank of American and other firms. AIG’s business was, above all, to access risk. That, more than any other single factor, is at the core of the insurance industry. AIG had an army of analysts. Any multibillion investment made by the firm could have and should have been vetted, if AIG cared enough to calculate its risk.
- Get Your Reputation Insured With AIG (mediabistro.com)
AIG subsidiary Chartis … AIG’s own crisis situation was so bad, this subsidiary changed its name from AIU Holdings to Chartis so it wouldn’t be associated with its parent company. And, according to a Harris Interactive study from earlier this year, its reputation is still pretty much in the toilet.
- Cheat Sheet: What’s Happened to the Big Players in the Financial Crisis (propublica.org)
Mortgage lenders contributed to the financial crisis by issuing or underwriting loans to people who would have a difficult time paying them back, inflating a housing bubble that was bound to pop. Lax regulation allowed banks to stretch their mortgage lending standards and use aggressive tactics to rope borrowers into complex mortgages that were more expensive than they first appeared. Evidence has also surfaced that lenders were filing fraudulent documents to push some of these mortgages through, and, in some cases, had been doing so as early as the 1990s.
When banks found CDOs hard to sell, some of them, notably Merrill Lynch and Citibank, bought each other’s CDOs, creating the illusion of true investors when there were almost none. That was one way they kept the market for CDOs going longer than it otherwise would have.
Securities and Exchange Commission failed to crack down on risky lending practices at banks and make them keep more substantial capital reserves as a buffer against losses
- What caused the financial crisis? The Big Lie goes viral. (ritholtz.com)
The Big Lie made a surprise appearance Tuesday when New York Mayor Michael Bloomberg, responding to a question about Occupy Wall Street, stunned observers by exonerating Wall Street: “It was not the banks that created the mortgage crisis. It was, plain and simple, Congress who forced everybody to go and give mortgages to people who were on the cusp.”
What caused the crisis? Look: …. 1-12 …
Bloomberg was partially correct: Congress did radically deregulate the financial sector, doing away with many of the protections that had worked for decades. Congress allowed Wall Street to self-regulate, and the Fed the turned a blind eye to bank abuses.
tonymc Says: … Liberalism, socialism and the inherent borrowing caused the catastrophe. Big government meddling and irresponsible borrowing caused all the problems and is still driving bad behavior.