Global financial crisis – an explanation

The past few months have been both tragic and interesting as the global financial crisis unfolds. I’ve read countless articles on the topic, contemplated countless predictions and been shocked by the magnitude of the casualties.

I don’t think anyone realised what the global effect of this crisis would be, and we still have a long way to go. There will be many more casualities to come, not just corporations but entire economies.

The only good thing about the global financial crisis is that people have woken up to the fact that unfettered capitalism does not work. Capitalism has it’s benefits, but without goverment oversight and intervention, it leads to disaster. As it has over and over again.

At least this crisis will lead to some much needed changes.

Out of all the articles I have read, 2 of them were more interesting and informative than the rest. I would like to share these articles with you. The first is an article by George Monbiot (one of my favourite writers) who writes for the Guardian in the UK. In responding to people’s rightful objections to having their tax money used to pay for corporate malfeasance, he shows how it has been happening for years. We just didn’t know about it.

http://www.monbiot.com/archives/2008/09/30/congress-confronts-its-contradictions/

The other is an article written by Walden Bello and is a very succinct, balanced and simple explanation of what is a very complex scenario. After reading this short article, I had a much clearer understanding of what happened and why.

http://www.fpif.org/fpiftxt/5560

I hope you find these articles as interesting as I did and I look forward to your comments.

You may also like...

8 Responses

  1. Candice says:

    hi dax
    thanks for the link. have only read the second link so far…
    but it was really useful, thanks.
    i studied finance and economics at uct from 1999-2002, and then some courses on globalisation and governance at stell last year. it blew my mind how different the takes were. at uct we were spoonfed all this stuff about how great financialisation is (derivatives etc). and a completely neoliberal take on economics. and then i got to stell and was lectured by some relatively left-wing people… who warned of many of the issues presented in this article.

    i found the article managed to tie together bits of knowledge i have, but hadn’t managed to connect in my mind, into a coherent whole.

    i’m not sure how someone with no economic background would understand the article… but it’s a very good overview of things.

    thanks Dax

  2. Alistair says:

    This is a great (and quick) primer of the subprime crisis. It’s done in cartoon format and is easy to understand as well as funny. I recommend it.
    The Subprime Primer

  3. Dax says:

    Glad you liked that article, Candice. Be sure to read the other one when you get a chance, also very interesting.

    Alistair, thanks for the link. It is a simple explanation of how the sub-prime crisis happened (with some bad language!), whereas the second link I gave looks more at what has led up to a situation where this sort of crisis can happen.

  4. Warrick says:

    I came upon your site through restaurant reviews and ended up reading the second article you posted a link to and just wanted to comment on it. It was informative but I think that the present crisis should spur all us South Africans to delve a little deeper into why and how this happened; understanding the banking and world economic system in general instead of waiting on Trevor Manuel to make a statement. How many of us know and can explain what a fractional reserve system is, or leverage? A few links for those interested:

    You-tube video on fractional reserve banking and “Money as Debt” http://www.youtube.com/watch?v=vVkFb26u9g8

    Money and the crisis of civilization
    http://www.realitysandwich.com/money_and_crisis_civilization

    Zeitgeist: Addendum – a fascinating documentary
    http://video.google.com/videoplay?docid=7065205277695921912

  5. For a lighthearted parable that also seems spot-on to me, there’s “the financial crisis, as explained to my fourteen-year-old sister” as found at kottke.org (http://www.kottke.org/08/10/the-financial-crisis-a-pokemon-parable).

  6. Dax says:

    Thanks Rory, that is the most simple explanation I have seen and it has a clever sarcastic angle to it.

  7. Dax says:

    Hi Warrick, thanks for your contribution to the discussion. I enjoyed that article ‘Money and the crisis of civilisation’. My favourite paragraph was this one:

    The same is true if I cut down a forest and sell the timber. While it is still standing and inaccessible, it is not a good. It only becomes “good” when I build a logging road, hire labor, cut it down, and transport it to a buyer. I convert a forest to timber, a commodity, and GDP goes up. Similarly, if I create a new song and share it for free, GDP does not go up and society is not considered wealthier, but if I copyright it and sell it, it becomes a good. Or I can find a traditional society that uses herbs and shamanic techniques for healing, destroy their culture and make them dependent on pharmaceutical medicine which they must purchase, evict them from their land so they cannot be subsistence farmers and must buy food, clear the land and hire them on a banana plantation — and I have made the world richer. I have brought various functions, relationships, and natural resources into the realm of money. In The Ascent of Humanity I describe this process in depth: the conversion of social capital, natural capital, cultural capital, and spiritual capital into money.

    That for me summarises one of the major problems with economic society today.

    Regarding your other 2 links, I have seen the documentary ‘Zeitgeist’ and found it very interesting. I didn’t know that there was a sequel. I will have to order it because watching the whole thing online is a bit heavy on bandwidth.

    The money as debt video is also an hour of YouTube, so I will have to get hold of that some other way too.

  8. Dax says:

    Here’s an interesting article on why the crisis still has a long way to go:

    http://www.oftwominds.com/blogjune09/depression06-09.html