By the same token a housing crash in the US should not have brought the West to its knees, but it did so because the banks outside the US, largely in the UK, were already wildly overstretched, and the Southern countries of Europe had over-inflated their economies.
These things tend to be interconnected however. When I am tired it may well be that I have had too little sleep, got up late, and that will also be why I am hurrying, and being in a hurry, in turn, will be why I am fiddling with my jacket zips instead of concentrating on the road.
The economic crisis is the same - all the causes are linked to other causes.
Many people wish to finger "Greedy Bankers". That is plain wrong, and an attempt to shift the blame for the real error, politicians in each major Western Block pumping money into the system until asset prices were so high they went pop. Individuals and companies went bust, passing their debts to the banks. The banks went bust and passed on their debts to the governments. The governments of the more exposed countries went bust and are, at the time of writing, trying to pass their debts onto the richer countries. When they go bust, do we hope for aliens to bail us all out?
So although the ultimate villains are politicians pursuing ruinous mercantilist policies (China and Germany), attempting to redistribute wealth without considering the consequences (The US under Clinton), or trying to buy the votes of voters with their own money (the UK), they could not have got away with all these stupid decisions without a variety of interlinked special factors, and would not have even tried in the first place without some interesting aspects of human psychology.
Undoubtedly there are individual villains, like Gordon Brown, Fred The Shred, the senior management of Goldman Sachs, and those who foresaw the disaster the Euro would bring but believed that said disaster would be beneficial. In general however, everybody just did the best they could.
Over the coming posts I will attempt to explain:
- What is happening.
- How it is happening.
- What might happen next.
Much of this I will do by illustrating some of the fundamental principles of economics with which either journalists don't care to bother you, or else don't understand themselves.
By the time I've finished, if you've bothered to read along, you may well not agree with my conclusions but at least you'll be able to argue the toss without looking like what most people expressing an opinion do at the moment - ignorant jerks pontificating with no actual knowledge whatever.