To some, politicians, financiers and economists are out to bamboozle and manipulate ordinary punters. They all use peculiar language and acronyms to throw us off track, hoping we will lose interest in the details of their decision making and actions and, in some cases, make us blind to the corruption that festers behind the scenes. The concept of hard cash is relatively easy to grasp – earning, buying, selling, saving – but the world of money is a world where simplicity has no place.
The credit crunch and world recesssion which followed in its wake seemed to come out of nowhere but David Smith, with supreme patience, skill and attention to the facts, has written a most enlightening and disturbing account of the events that lead to the biggest global financial collapse in many decades. He traces the origins of the disaster back at least ten years: “No financial crisis emerges out of a clear blue sky. When a crisis breaks we kick ourselves for failing to spot what, with hindsight, were obvious warning signs.”
The spotters – economists, bankers, politicians and journalists – are supposed to play their part as guardian angels of the world markets with their boom, bubble and bust scenarios. But arrogance and indecisiveness creep in and egos get in the way of doing the right things. This book details the US sub-prime housing trigger, but elaborates on much more besides in explaining the rapid development of mortgage problems into a full blown crisis.
The tangled web of global financial links meant, inevitably, other countries would feel the heat. In the UK, with Northern Rock, it became clear that the Bank of England, the Financial Services Authority and the Treasury – “the three pillars of Britain’s previously admired tripartite system” – all failed to collaborate properly and decisively. Smith covers the context in great detail and helps to untangle some of the webs of intrigue and corruption, as well as identifying where good decisions were made and effective action taken.
He reflects on what happened and offers a vision of a future of instability, more government controls, higher taxes, a tighter jobs market, constrained consumers and more suspicion of the markets and financial institutions than we have ever known. As long as we have writers like Smith, we have a chance of understanding what the hell is going on with politicians, financiers and economists – all potential threats to our livelihoods. Hold on because, in this age of instability, it’s going to be a bumpy ride.
