Saturday, October 25, 2008

Welcome to the next recession

Autumn that was

Who made this mess? (copyright reserved)

By George Epp

Are you puzzled by the current economic misery gripping people-with-money these days? Are you confused by the fact that—although the economic landscape in your neck of the woods appears much as it did yesterday—all the news on the international front is insisting that we’re in for difficult times?

In the most recent issue of The Christian Century (October 21, 2008) Economics teacher at Wheaton College, James Halteman, explains what has happened nationally in the US to cause this international economic influenza. In summary, US financial institutions have been selling bond issues backed by mortgages with sub-prime interest rates, which mortgage brokers have been peddling like magic hula hoops. Inevitably, buyers of homes with far-too-generous conditions have had to walk away from their purchases, flooding the market with unsaleable homes, driving down the values of real estate, subsequently driving down the value of the bond issues, decimating the cash flow through the various lending institutions, consequently making it nearly impossible for many developers, manufacturers and exporters/importers to do business. The resultant state of panic has decimated the value of stocks and bonds, and has resulted in widespread selling-out behaviour, the curtailing of consumer confidence and the long skid down the recession slope.

Halteman’s conclusion: “Regulation of the financial markets needs to be updated—something that has been hindered by an anti-regulatory political climate.” That may be the understatement of the week.

I was told yesterday about a well-to-do Christian who is in a blue funk these days because the economic collapse has cost him massively. One presumes that his investments have tanked and the loss is on paper and might be regained if he holds on for the long term. But I have to wonder: What is an active Christian doing in the stock market anyway? The poorly-regulated way in which those institutions function these days means that they are less about acquiring an interest in the economic engines of the country in order to further common goals, and more about getting rich through non-productive, speculative behaviour. Take derivatives, for instance, buying and selling of futures, etc. This behaviour wouldn’t be so reprehensible if it weren’t for the fact that it “bets” with the common currency that you and I depend on to feed our families and further worthwhile goals, like schools, hospitals, art galleries.

I read on my currency that it is the property of the people of Canada through the Bank of Canada. How is it that we allow the misuse of our common currency by shysters who demand the right to unregulated speculation with it?

It’s time for big changes. Halteman is right. Trouble is, we’ve just re-elected a government that is congenitally gun-shy when it comes to market regulation. Let’s see what this whole mess leads to; with any luck we’ll come out smarter on the other side.

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