One Sherpa

Everybody seems to be talking about the (in)stability of the financial system.

What the heck does that mean?

How many people have any idea what it means? Most of the trouble we’re in right now is because common sense has not prevailed and the smoke and mirrors of financial engineering has gone unchecked because the perpetrators have had so much at stake. It has become “Custer’s last stand”.

Think about the comments coming out of the US from Bush, Paulson et al.  If they don’t sound like Custer’s last stand then I’m a fairy penguin and I’ll go back to my burrow in Antarctica!

Here are the facts.

We’ve had a recessionary correction every decade since the 1960’s except we forgot to have one at the beginning of the new millennium. As a result, we’ve gone on for 18 years of unbridled “growth”.

The problem is, much of this “growth” is not real, rather it’s being fuelled by a massive expansion in debt. Asset values have been going up and people have been thinking they are better off, but all the time they have only been looking at one side of the coin.

On the other side — the side people have not been looking at — we have seen unprecedented growth in debt.

Now, to cap matters off, these financial engineers have completely lost their marbles when it comes to how they have done their accounting. We haven’t been growing real value; we’ve been artificially revaluing assets and then balancing the books with more debt.

When I was doing my accounting degree in the late 70’s it was against all accounting principles to revalue an asset and call it a “profit” and then declare that as “profit” through the profit and loss account. But this is now the most common sort of “return” (profit) that is available… as long as we allow that to continue we’ll never get the cash to catch up to all this speculation.

Stabilising the system through a taxpayer-funded bailout is making sure that we don’t bring the system back to the reality of cash returns and we keep up the “smoke and mirrors”, “rabbit out of the hat” false profit system.

Now, the obvious question…

Who has benefited from all this additional debt in the economy? None other than the money managers and financial engineers of the financial system who have created it. The people who have made themselves rich by financing the revaluing of “assets” over and over again.

Now that their folly has been exposed they are saying that “we the taxpayer” must bail them out! Ordinary citizens have paid them all the way up on their crazy ride through higher and higher quantums of interest, and now it seems we have to pay them again as they slide down the other side.

Enough is enough, I say!

It is time that the people who built and run this crazy financial system were brought to account for their folly.

What do you say?