Wednesday 13 May 2009

I always said he was class.

Seeing as we're about to get inundated with a series of 'Carrick finally matures into the finished article' type stories from the press, here is a reminder, from the World Cup in 2006, of how good he has always been.

How can something so wrong feel so right?

At first this sounds terrible, I realize that. But the Anglo-Swedish rapping will win you over, especially from 1:14 to 1:22.

"It's laissez-faire until you get in deep shit."


The laws of supply and demand are pretty straightforward. As the price of a good falls, the quantity demanded rises and the quantity supplied falls.

So, when interest rates in the US were cut to 1% six years ago, it was logical for there to be a surge in the demand for credit. What made less sense was why that demand was matched by supply. Why were banks lending at such low rates with so little regard for the risks they were taking?

This article from Michael Lewis (author of Liar's Poker) is one of the best I have read on how the banks got themselves in such a mess.

I think the key quote comes from Lewis's ex boss John Gutfreund at the end of the piece.

"It's laissez-faire until you get in deep shit."

This crisis did not start when Greenspan and Bernanke's interest rate rises instigated a wave of foreclosures, nor when the Bush administration deregulated financial markets, though clearly that didn't help. It started during the 80s, when as Chairman of the Federal Reserve, Greenspan repeatedly made it clear the US taxpayer would ultimately foot the bill for irresponsible decisions made on Wall Street.

Given the US government's response to the Peso crisis, the Russian default, LTCM, Savings & Loans and 9/11, the banks had no real incentive to pay attention to the consequences of their diversified ownership or their irresponsible lending. They were too big to fail, they could hold policy makers to ransom and they knew it.