Credit Crunch

The effects of the Credit Crunch was very visible this morning. The builders on the project next doors to the Vicarage wrote this. "No Money, No Work No Hope". Three weeks ago the gaffer came and told us that they were off since the client had stopped paying. Since then there has been no activity.

In the last month I feel we all had a mini-A Level in Economics through the mass coverage of the new depression. I never had heard or imagined there existed such a thing as wholesale banking. I naively thought that when the bank said it had money it actually possessed it. But now we learn that Peter has been not only borrowing from Paul - he has creating a whole pyramid sales out of billions of dollars. I read that it probably amounts to 1 trillion pounds of money that doesnt actually exist but should. I know that you should not pay off a loan with a loan BUT surely the reverse is true you should not loan money from a loan.

I appreciate that capital and markets can be a good thing. Over the centuries credit has allowed the middle classes to access large sums of money in a way that otherwise would not have been possible. Without this we would either be in a command economy or feudalism. It has allowed people to cash in on their ideas, small businesses to become big businesses, etc. Without restriction this good for society can become an uncontrollable nemesis.

Now I fear we are seeing the effects of what mathematicians call a non-deterministic system going into peak resonance. This is the classic butterfly effect of chaos theory. My instinct is that just shoving large sums of tax payers money on it will do nothing. It may make it much more worse. This is because when a lot of help does not work the global panic becomes a whole lot bigger. Anyway, placing all our chips on the roulette table is the sign of serious addiction not sensibility. The best thing would have been to step back.