Who Caused The Global Financial Crisis?

Before 2008 the national debt of the US was 10 trillion, now it is 20 trillion. During the boom years US home owners repeatedly mortgaged their homes to the hilt to live far beyond their means. Then at the outset of the consumer induced financial crisis of 2008 most of these proverbial “grasshoppers” decided to flake on their mortgage payments. Unfortunately, global banks were fully invested in this toxic debt therefore it ended up on the EU and US government books. Does this reflect the values of “honest hard working families”? Paradoxically, this absurdity occurred in the aftermath of the most recent 2008 financial crisis.

 Perpetual Middle Class Bailout

Due to the severe magnitude of the potential mortgage defaults the entire global economy faced a severe systemic risk. Therefore, without government involvement it would have triggered a systemic collapse in the global banking system. So the government needed to bail out the banks or the collapse of the western banking system would drag the world economy down with it.

Essentially the bank bail out in 2008 was a middle class bail out. Although we don’t like to call it what it really is. The electorate in the US still refuses to acknowledge the obvious, it is an inconvenient truth. Politically it is easier to just blame Wall Street rather than Main Street.

Time to Re-inflate the Housing Bubble

All that mortgage debt was then combined with fiscal and monetary stimulus to re-inflate the US housing bubble and the US economy.  As a result, trillions more in debt was piled onto the US government books. Additionally, mortgagors in foreclosure enjoyed extremely lenient terms granted by the Obama administration. This included 2 years of living in default in their foreclosed homes. Thus, they made no mortgage or rent payments, real estate tax payments or home insurance payments for 2 years. Otherwise, they would have been “homeless”.

More Middle Class Bailouts Please

Now, the electorate in the US voted to nationalize health care, baby boomers expect their social security checks to be paid on time and there is also a looming $1 trillion dollar student loan bubble that is going to blow up at some point. What is the answer politicians come up with? More debt on top of more debt and more debt that the US is never going to pay back.  This is the democratic solution to the economic problems of the western democracies.

A Temporary Solution At Best

Having your politicians sweep your personal debts under the rug for you only creates big problems later on. All that easy money ends up sloshing around the world creating asset price inflation in some places and deflation in other places. Central bankers are in uncharted water and the results of unbridled consumerism is now coming home to roost.

Global Extremism Is Nurtured by Economic Policy

Global extremism has its roots in economic instability. The US shale revolution is a perfect example. Easy monetary policy in the US caused over investment in the US shale oil industry. As a result, the global oil market collapsed. The collapse of oil destabilized many developing nations dependent on stable oil prices. Examples include: Libya, Iraq, Nigeria, Sudan and Syria. Extremist groups such as ISIS, Al Shabaab and Boko Haram all thrive in unstable environments such as this.

European Refugee Crisis

Now there is an influx of refugees into Europe on an unprecedented scale. Horrific terrorist attacks in Western Europe have been escalating. The cure for this is not to build a wall between Northern Africa and Europe. The cure is for developed economies to live within their means and keep their personal debts off the government books.

The Western Agricultural Bubble

The instability in emerging markets is exasperated by the decades of lavish agricultural subsidies given to farmers in the US and Europe. So additionally, we have overcapacity in western agricultural production. Therefore, farmers in developing countries are priced out of global markets and cannot even feed their own populations.  There is no question that famine is a large factor feeding global extremism. Paradoxically, obesity has become epidemic in the US. Why do profligate fat people need agricultural subsidies?  I am as perplexed as you are. 

In Conclusion

Simply put, sustainable global travel is based on the concept of living within your means. So if you cannot support yourself 100% while inside your country of origin, why would you aspire to travel outside of it? Surely there are plenty of nice affordable vacation spots near your own home. Unfortunately, that’s still not how it works.