Life in the Snow Lane

HOW stupid to visit the UK in the mid-winter, sub-zero temperatures and slushy snow! But it was a necessity and gave me additional insight into the evolving financial holocaust.

Iconic companies began falling as I arrived, the carnage continued and 2008 ended in an apathetic whimper flavoured with the blood of corporate Britain splattering the walls of the Empire.
The media are full of failed decision-makers and their co-conspirators, financial and journalistic weasels attacking the already bloody corpse with their machetes in a rising tide of financial blood. The ignorance of authority is now exposed as they flail around in a maelstrom of frenetic activity seeking self-salvation.
All are blaming their discredited regulatory institutions whose facades of competence have been ingloriously ripped away, the banks for not lending despite the billions of bail money forced into their vaults and the government for everything!
Massive job losses, collapse of order books, currency weakness and, probably most of all a complete loss of faith in authority, private and public, is having impact on societal relationships and exposing the less nice facets of human nature, long suppressed through delusion and money.
Humanity, while being creative, ambitious, visionary when things are good, reacts to hard times by exposing the cruel, vindictive and greedy. When life gets tough the bad is amplified: the current political/economic mayhem is doing just this. Tolerance is turning to intolerance.
The realities of disintegrating customer demand, industrial contraction and job losses are now leading to real poverty, human misery, social instability and an increase in criminality. The parallels to the 1929 market crash are irrefutable, as is the fallout. Survival is a basic instinct. Danger.
Such circumstances mean an increasing protectionist environment will release international tensions that have been restrained through trade dependence and diplomatic bribery (less cash now). History is full of military disputes preceded by economic collapse and failure of diplomacy especially when vast productive capacity is lying idle.
As is often said, war is started by governments and peace concluded by people; war is an old method of consolidating dissension in nation states! The threat to world peace is real.
Thus the current remedial actions of western governments must work but are currently horribly off track. Why?
It is assumed that the fall in consumer demand is due to a lack of lending by banks and banks must be ‘forced’ to lend. Wrong. It is now the consumer calling the shots; discretionary spending has all but ceased and banks cannot lend and as such are unable to do their business. Businesses are also unwilling to borrow as their products are not selling. A vicious downward spiral has been created. Why? Consumers have lost their trust of institutions and authority; they realise that despite the rhetoric, they are on their own.
The contraction of globalised finance and trade will result in a shift towards local manufacture even if product prices are higher; jobs and social stability are more important than raw efficiency. Cross-border financing will become more prudent and thus give local business more access. However, governments remain convinced that global growth remains an imperative. They are wrong.
The old way of trying to drag ‘developing’ wages and prices up on the ‘ability to pay’ principle is dead. Western wages and prices must now deflate towards developing country levels; there is hope for a more equitable world. Will the West have the courage to change? Negative interest rates?
2009, let the battle commence! A retreat to value? For Namibia good long-term opportunities exist but …
csmith@mweb.com.na