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Thoughts on a Thursday 16 October 2008

Posted by Dr Moose in Faith, Life, Ponderings, Recommendations.

Not a particularly well-developed essay on any one topic – something more akin to a miscellany of meanderings.

“It’s the Economy, stupid!”

Despite all the momentous happenings on the global stock market, the “nationalisation” of banks and a world-wide debt crisis, do you, like me, feel that very little has changed? And add into that the occasional quotes about when the crisis will begin to hit the “real economy” and maybe that puts a little perspective on it. Having said that I don’t have a mortgauge to pay, coupled with a pretty secure job so I am a little removed, unlike some family and friends. The most I have to worry about at present is about how long it will take my modest investments (a PEP from the early 1990s and a modest endowment policy) to recover, but since I’m not planning on touching that for years it shouldn’t be an issue. And maybe I should add that since the majority of the money didn’t arise from my own labours in the first place, grateful that I am for it, there is rather less emotional attachment.

Which brings me to my first point – a recommendation from the august pages of the BBC all about Bubbles. Briefly put it’s all about how we draw comfort, encouragement and action from those around us, even when they are obviously not wise in objective terms.

Prophetic or Pathetic?

Related to such thoughts did anyone else notice a few weeks back that the archbishops had made withering criticisms of certain sectors of the banking industry, largely focussed on their greed. The main problem, especially when viewed in the light of the preceding recommendation is that appears to be wise after the event. I must spend some time looking at the classic “Religion and the Rise of  Capitalism” to look again at how Christendom succeeded in neutering the classic Christian teaching on the evils of usury.

Nevertheless I’m reminded of a speaker I heard many years ago on Radio 4s Today Programme who was saying that society expected the Church to take the lead on moral and social issues of the day. To which my answer now remains the same as it did then. “No it doesn’t. The wider world expects the Church to react against the issues of the day, not to lead them.” It’s true that people of faith should be leading the way, but more often that not we are perceived as trying to turn the clock back!  But, if anyone within the churches had been speaking against the system, maybe the real question is whether anyone noticed. (Jubilee 2000 comes to mind as a success – but how much has actually happened in the recent years?)

Sex on the Beach, or not

It’s stuff about morals and laws that bring me to this too – the story about how what in the western world might be regarded as perfectly normal, or at least, broadly accepted as two strangers met and enjoyed each others’ company with greater or lesser degrees of intimacy. Once again, woolly evangelical that I am, brought up in a culture of individualism and as fallible as the next human being, find myself in two minds. I can approve of regulations about behaviour that is held to be indecent (and wonder whether there is actually any consensus in this country on that one!) but I do wonder what the wider cultural reaction might be to an offence of “unmarried sex” as the BBC puts it. Call me old fashioned but I still do believe that marriage is the right place for that – but if such an offence were to exist and be prosecuted here in the UK there would be an awfully large number of us carrying a criminal record. (And notice the use of “us” and not just “people”!)

It’s no good for us to be all nostalgic about “the good old days” which often weren’t, of course, but if we as a nation and people really want there to be standards of decency and behaviour that have closer connection to classic Christian moral values, or even just to the past, we have to do something about it. Maybe that’s a Bubble we should all be trying to inflate, together? Would you care to blow first?

And finally…

News just in from the colonies – God: homeless!



1. Thoughts on a Thursday | World Financial Crisis Blog - 16 October 2008

[…] Originally posted here: Thoughts on a Thursday […]

2. Chris - 17 October 2008

The credit crisis represents a failure of leadership and vision. One by one all the barriers that were meant to protect the financial world and by its extension, us, were removed slowly and deliberately.

The protection I speak of came in three parts, legislation, risk management and agency oversight. The Glass Steagall act was essentially neutered in 1999 and was cheered through at the time. New financial products were created to reduce risk and thereby make banking a safer place to do business, the credit default swap was born. I could insure myself and other banks against a default on my debts and my creditors. This would mean that the whole world of banking would be a lot safer and therefore could take on a lot more risk. This new risk would be checked by the rating agencies, the govt watchdogs and the internal risk management departments of each bank.

Three reasons to be careful have now subverted into three reasons to take on more risk. The legislators passed their responsibility to the watchdogs who accepted the words of the risk department that all was well which then reassured the rest of the market to carry on buying. The rating agencies passed off the debts as completely acceptable.

What should have happened is that the ratings agencies should have enough vision to look into the debts as they were being sold and said something about the subprime components. This should have forced the internal risk departments to explicitly warn label the debts as part toxic and so force the leaders of each bank to realise what was happening within their own companies. Too often no one understood what was being sold or bought. Then the govt watchdogs should have worked with the legislators and realised that these derivatives (the credit default swaps) were not a transparent market and that no one was managing it. There was little or no governance.

The concern for you and your parishioners is we may or may not have reached a minsky moment – http://www.moneyweek.com/news-and-charts/economics/have-we-reached-a-minsky-moment.aspx. What is perhaps more likely is there will be a 1-2 year recession in which unemployment will increase and we may or may not see further sharp falls in the FTSE 100 and housing prices. A fall of 75% in the FTSE (top to the bottom) and 50% for house prices is the extreme outlier but nominally possible. We would be combining the credit crunch drop together with a recession drop so there would be two lots of reasons to sell the market.

Beyond that we are likely to see a stock market that does not do as well in this new world as it did in the past decade. If there is less money to lend out and less fervent economic activity the potential for profit will be less. The returns from your investment will probably not be as good. We have eaten a large and spicy meal which we now have to digest and so take things a bit easier. Economists plot the profit returns over decades and are expecting this sequence of events. http://www.marketoracle.co.uk/Article4303.html but as always with investing there is another side to each argument so be warned of that. http://www.fool.com/personal-finance/retirement/2008/09/05/why-stocks-will-rise-again.aspx

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