Tagged with Crash

Is Labour ready for another economic crisis?

a man pushing over the word "crisis"Ellie Mae O’Hagan writes that the Tories are politically prepared for another economic crisis, should one hit. Looking at the lack of profitable opportunities for capital presently, the ongoing investment strike, stock markets that went up and then came down, and the inflating credit bubble you’d be daft to rule one out with certainty over the coming years.

Ellie talks about how she felt the left response to the crash(es) of 2008 were bland and complacent. My experience was different. I wrote at the time that there was a bit of energy and excitement about, even though we knew the government would strive to make a crisis of private capital into a question of public spending. For our part (I was a Socialist Party member up until early 2010) it was a spur for activity, of trying to raise questions about the crisis-ridden character of capitalism and get people to take our analysis seriously. Never mind that the SP’s theory of crisis was premised on the underconsumption of the working class, and therefore was both wrong and owed more to Keynes than Marx, and that it had confidently predicted 15 out of the last three recessions, we felt we were right and that our ideas had been vindicated after 30 years of neoliberal consensus. Continue reading →

Now they’re aiming to go back to non-prime mortgage securities which caused crash

house price collapseIf you want evidence of how reckless and desperate bankers and investors have now become in search of higher yields, look no further than the widespread decision to return to a variant of the mortgage-backed securities which precipitated the 2008-9 crash.

Then it was sub-prime securities which were knowingly sold to households handicapped by low pay and insecure employment who predictably could not maintain their mortgage payments in a volatile labour market. Now it’s simularly financially disadvantaged individuals who are lured to take on non-prime mortgage-backed securities, those that do not meet even the minimum legislative standard. But of course they do offer high yields, and if the bankers can dispose of enough of these financial vehicles laced together with other dodgy securities, the risk has been passed on to some other half-witted investor. Continue reading →

So there won’t be another crash?

Gordon Brown and patriotic LabourIt’s not often I agree with Gordon Brown – indeed I can’t remember the last time I do so – but I think he may be right when he predicted earlier this month that the global economy may be heading for another meltdown. He said, rightly in my view, that the lessons of the 2007-9 financial and economic crisis have still not yet been properly addressed. Perhaps the the most important of these is the continued growth of the unregulated shadow banking system. It is worrying that insurers and pension companies as well as other financial sub-sectors like asset managers and hedge funds are now part of this shadow system and are seeking to fill the vacuum left by the shrinking banks.

In this switch away from plain old under-writing AIG was a pioneer, and its huge collapse should set the alarm bells ringing. To be fair, the Financial Stability Board has recently included 9 insurers among its list of globally systemic financial institutions that should be closely monitored and held to higher levels of capital adequacy. But is it enough merely to note the problems? What action is being taken to head off another crash rather than pick up the bits again afterwards? Continue reading →