The Upcoming Financial Crisis Part 2

The upcoming financial crisis will be the third financial crisis in a row, and yet, the masses have not realized what is going to come in a few years. It’s not a conspiracy, but it is apparent to me that the fear of the end of the United States, the coming of a global financial catastrophe in which masses of people – even from the developing nations like India and China – would lose their jobs, wherein people would literally go on for days without food, and worldwide riots would become a daily phenomenon, is seeming highly likely. It is an alarm that in spite of all the developmental theories and state-of-art economic systems of the West, the world has inevitably turned into an exploiting ground for the elite and super powers, who cross the red lines so often as to make humanity vulnerable to any small miscalculation on their part; where the failure of one hedge fund in a large investment bank (i.e. similar to that of Bear Stearns before the 2008 global financial crisis) could start a global crisis, that smells much like an Armageddon. The instability of this financial system is shocking.

Knowing even that more than 30 million people became unemployed and millions lost their homes in the last financial crisis, at a point in time; it started to sound like a conspiracy theory to me. How could I even rationalize that a few people like the former treasury secretary Hank Paulson, also known as “The Snake” by the Wall Street executives, can single handedly promote an infrastructure that literally destroyed millions of lives? Does God not watch over the things we can’t control?

Well, God does love his creations, i.e., even those on the other side of the globe were affected; in China, 10 million got jobless, but they still – in spite of the hard time – found food and shelter. In history, it is always a few people who make mistakes and in consequence, the masses pay. The difference in this era is that technology, science and the infrastructure have made it possible to make it bigger, globalizing the once local scams to states and nations. So even the pot smoking CEO of Bear Stearns, Jimmy Cayne, gambled so big today in the pre-Mortgage crisis era that when his bets started to turn against him and his company fell, it started a global financial crisis.

The paranoia chills and the scares got over when I rationalized that the destiny of the masses was nothing but much suffering. But no matter how big of a blow the few powerful give them, they still do survive, although the greedier lot gets the worst of the misery. The greedy Americans, who bought the moral hazard, bought homes on mortgages even when their pockets did not allow them, or in other words, got their spending habit way out of control, were affected the most. In weeks and months, they made fortunes; but in a few years, when the bubble burst, they had lost everything and came on the streets.

It takes my breath away still looking at those millions of people who worked their entire life in capitalist industries and services, when one day they just got laid off without any reason and got on the streets because of the mistakes a handful of lobbyists, made halfway around the world. If there can be tent cities in Europe and America, if all the American masterminds cannot stop California from going to ruins, if nations like Greece cannot pay their creditors, if nations like Iceland can be categorized as terrorist on lists with Taliban, then when the real bubble of all bubbles explodes, I cannot imagine what will happen in the developing nations!

Earlier Bubbles

In the late 1990s, there was heavy investment and huge venture capital funding for startups of the dot-coms, because big investment firms came into being, the GLB act and deregulation helped make this nightmare come true. The bubble bursted when these dot-coms could not turn out profits as they never had the potential to, no private entity would finance these crazy investments, and these few investment banks had made the markets much of a Casino where they gambled with the people’s money. The only ones to have mindboggling rise in profits were the few masterminds who created the infrastructure or the ones who thoroughly knew this system. The dot-coms failed, and followed a market crash in 2001, which led to a 5 trillion dollar loss.

Then the terrorists attacked the twin financial centers, located in the middle of the great New York City; I would not talk on the basis of presumption, but the biggest advantage of 9-11 was the kickstart of the financial weapons of mass destruction; the CDOs, the Subprime Mortgages and the Derivatives. Although it was hard to imagine investment frauds after the dot-com bubble and the 9-11 attacks, but like always, the US government did not focus on paying the price for their mistakes, they rather pretended that everything is fine and kept everyone happy by letting the party go on.

To kickstart these weapons, the US government encouraged the people to spend and lowered the interest rates to 1%. The few gigantic investment banks had a fantasy come true, and with the final piece of the puzzle in place, they started once again investing heavily in anything they could misrepresent and resell with a premium in the open market.

It seemed at a time that the new ways of the financial institutions were a success and there was a global party going on. Forget the oil reserves of Iraq and the heroine of Afghanistan, individuals like Jimmy Cayne sitting in their offices made billions in a few years, and it was not just Jimmy Cayne, rather it was all those capitalists who got a chance. It was not just America – London and New York were in a competition to be the financial capital of the world, so London’s Prime Minister Gordon Brown issued the Light-touch regulation, also deregulating the city to attract financial institutions. People in the investment and derivative business went from rags to riches, re-selling and misrepresenting stocks. They made a global bubble!

Iceland was truly a land blessed by God, with an abundance of natural resources, clean energy and a thriving economy. One man, Prime Minister David Oddsson, with his free market ideas, tried to privatize every government institution; even so he succeeded in privatizing Iceland’s main resources, its fishing grounds and its oldest banks. Soon, there was a huge rise in property value; the government encouraged the people to buy even two homes. With lowered interest rates and huge investments coming in from banks, there was a bubble. All bubbles burst at some time, so did Iceland’s; at the crash, Britain froze all the assets of Iceland in foreign accounts, and put Iceland in its anti-terrorism legislation along with names such Al-Qaeda and Taliban, leaving them with zero credibility. The catastrophe was in each Icelander’s home and, at last, masses of Icelanders gathered with pots and pans, forcing their President to resign.