Many words are being spoken and written about global financial turmoil. The conventional wisdom in Jersey seems to be “quietly optimistic.” But who knows what the future holds?
The US proposals for a global permanent solution costing $700,000,000,000 – to be financed by US taxation – have been greatly welcomed. But there is talk that US taxpayers have other ideas – and they may not wish to support British or European banks. Gordon Brown and Alastair Darling are talking of a further global solution involving better regulation.
If the US support does not extend to British banks, what about the operations of those banks in Jersey? And if the British “global solution” involves more regulation how will this impact bank profitability in Jersey?
But the principal widespread unease about these solutions concerns the bail-out of persons and banks who will then not bear the consequences of their past incorrect actions – and greed.
The nation of Israel preserved its historic records covering a period of about 2000 years BC (Before Christ). Some of that literature is in the form of histories of the people and their God – YHWH, the God of Israel. Other literature is classified as “wisdom” – things like poems, songs, wise advice, proverbs and sayings. All of these are now printed as part of the Christian Bible -because all pointed forward in a marvellous way to Jesus Christ of Nazareth (AD 0 – 33).
Above is one piece of wisdom that is repeated several times in their national records,
Does it apply to the present turmoil?
Think about it this way –
1. If a food shortage looks likely, a few families may stock their freezers and no problem arises. But if all do it, all fall into the dug hole.
2. Years ago one bank, lending to borrowers who might have difficulty to repay, would make a lot of money by adding an extra percent of interest. But when all did it, the extra funds available to sub-prime borrowers were seriously increased and house prices inevitably rose – and rose - until the bubble burst. So, again, if all do it, all fall into the dug hole.
3. The credit crunch first arose when the banks became scared – scared that other banks, like themselves, had on their balance sheets assets that could not be sold without serious losses. So they stopped lending to one another. And the US, European and British authorities have had to lend billions to – because they won’t lend to each other except at a price. Again, if one bank stops lending to other banks, there is no real problem. But if all stop, then all fall into the dug hole.
4. The problem remains that bank assets may not be sufficient (at present values – worse at possible future values) to enable them to repay depositors. Fear arose in connection with HBOS. One answer is a merger - the bigger the bank the more confident other banks (and depositors) will be to lend to it. The merger of Lloyds TSB and HBOS, however, would result in perhaps 20,000 redundancies. That could mean 20,000 homes repossessed because unemployed people cannot afford to keep up mortgage repayments. If only one merger takes place – bank losses from forced sales will be spread amongst many. But, if several mergers occur, the volume of forced sales of houses in a declining market will cause all to fall into the dug hole.
It seems as though greed is, indeed, a dug hole – dug by many - but a hole that can only be truly seen when many, selfishly, follow it.
What’s the answer? A complete new beginning – a realm marked by selfless giving and not by selfish getting. One man gave himself and has led the way - Jesus Christ of Nazareth. His realm is very different. |