Good News

October 14, 2008 | By Paul Mackenzie Ross | Filed in: finance, politics.

I never actually intended this to be a socio-economic/political blog but it certainly seems to have turned out that way, and here’s another reason why…

Henry Paulson’s $700 billion “bail-out” did nothing for the worldwide markets. American citizens’ money was pumped into the wound, much to their utter dismay over what many commented as the “long bloody slide into socialism”. It’s good to see that irrational fear is alive and well in the 21st Century.

But then on Monday 13th October Britain injects £37 billion into its own banking system and, after meetings with European leaders, they do the same.

The markets bounce back. The FTSE some 8% and the Cac and Dax up 11%. The Dow Jones leaps 11%.

So the conclusion from a layman? America brought its own “junk bonds”, giving the banks money for their toxic assets but not really stimulating liquidity. Britain, under what I suspect not to be the leadership of the Chancellor but more the ex-Chancellor, makes an incisive move to fuel the engine room and not isolate the bad fuel. Result – the markets respond favourably.

So whilst the land of the free and the home of the brave created this whole sub-prime toxic asset situation and the greedy bankers of the rest of the world brought into the circus, it seems that it has taken Europe and particularly Britain to actually do something genuinely positive. For all the condemnation we’ve received about being the “socialist” part of the planet, it seems that we’re far more effective than those who value “individual liberty”. (Doesn’t a collection of individuals with the same actions effectively become a social movement?) And wasn’t it individuals “taking liberties” that got us into this mess in the first place?

So that was good news #1. We’ll see how the markets fare today, although Asia has already bounced and confidence could well be restored. For now.

And Good News #2?

Paul Krugman has been awarded the Nobel Prize for Economics for his theory linking international trade and economic geography. Whilst most Nobel Winners are people whose work I have never had the fortune to study in my field, I can at last and at least say that I know who Paul Krugman is.

The Great Unravelling: From boom to Bust in Three short Years was the most high profile of Krugman’s books I read, basically damning the Bush administration for its policies of pillage. The first book of Krugman’s I read and the one I returned to in the wake of this worldwide economic crisis, is

The Return of Depression Economics, a timely re-read in these days of economic uncertainty. Krugman is brilliant and balanced and, to Gordon Brown’s credit, he praised the British Government for their leadership and insight into this latest round of bank funding.

So there we go. Two items of very good news. Let’s hope I win the lottery tomorrow night then.

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