In the Financial Times (23 Oct 09) prize winning journalist Gillian Tett carries on the story that was published as the book Fool’s Gold earlier this year where she tells of the unfolding of the credit crash since about 2005. She says that financial bubbles are still with us and in good heart. Banks ‘do not want to use cash to make loans’ and bubbles of financial asset prices are growing again, ‘horribly familiar’ she calls it. This agrees with the stories around of firms finding it hard to get loans for investments which would promote ordinary employment -rather than the speculative kind sourced in highly leveraged 0.5% interest money.
For an telling video interview from Reuters from earlier this year about this book see this link. Towards the end she addresses what is at the heart of the problem for the future – that of credit creation. She says that if the economic world is to get used to a more restrained future, less credit creation will take place and then how will all the money be made by the bankers and their ilk?
But the future need not be so bleak for the rest of us. I wonder if she met Richard Werner when she was in Tokyo from 1997 for a few years? His book The Princes of the Yen tells how an economy can be tended and nurtured to bring long term economic growth and also what happens when such a system lacks openness. Gillian Tett clearly understands the problems ahead, she should talk to Prof Werner, now of Southampton University. He has seen from the inside nearly 20 years of the Japanese experience and has vital insights as to what sort of an economic world would bring enduring stability and growth. Look on this blog at the labels/links below for some tasters of those ideas.