What we’re currently experiencing is not a recession (or a depression).
Steve Ballmer (Microsoft CEO) recently (Stanford UniversityMay 2009) said “...what we have been suffering through is no normal recession, but rather a reset to a lower level, a kind of severe rejiggering of the economy that has happened just four times in the past 200 years.”
Well said.
There are also claims that not even economists could predict the events we have all seen as their models of prediction simply were outdated and not updated with information about new financial ‘products’ such as Collateralized Debt Obligations (CDO). In a way, I think many many people were blinded by the greed/growth being experienced – in this case it really does fit the cliche that ‘what goes up must come down’.
What’s the moral of the story? I hope more people become educated about money, where it comes from and how it’s used more than they do today. In a way it’s easy to blame the households that took out too-large mortgages underpinning the CDO’s but that would be glossing over the systemic problems brought about at many levels of the finance/banking industry that really showed how internally frail the whole system was. House built of sticks?
2 replies on “Not a recession!”
A brief and good summary of the issue. I wonder what the average person could do. One option, at least in the US, is that people could do more personal banking at credit unions. These are local banking institutions where all the customers are shareholders and they invest revenues back into everyone’s accounts. Laws limit their membership and reach, so they don’t tend to invest in crazy stuff like CDOs.
However, people often don’t use credit unions becuase they’re not as convenient as big banks – less ATM locations and some higher fees.
Is there an Australian equivalent of credit unions?
Chris, we do have credit unions in Australia, and they operate in a similar fashion to the ones in the US. You’re right about the convenience though – Banks made it a point of theirs back in the mid 90’s to con/hoodwink (strong language, I know) people into thinking that convenience was better.
However, if people knew more about {their} finances and could budget more (better?), there’d be less need for Bank ‘convenience’ – go to the ATM once a week and withdraw the $ you need for the week – have bills paid automatically, and stick to your budget. People would soon find they don’t really need the convenience they think they did!
Oh and why we’re at it, the drive-up ATM really says it all about ‘convenience’.