Wednesday, 24 August 2011

Financial Problems ...

A recent article in Der Spiegel touches on the problem of "financial markets" and the manner in which they impact on national economies. It makes very interesting reading and exposes the fact that all major investment currencies are extremely vulnerable to manipulation by investors. The fact is the "market" controls the politicians, not the other way round.

Nor can you blame the investors or the investment fund managers for exploiting a system which allows the trade of a nations "assets" on international markets. In fact, at present it would be near impossible to stop it. The "investor" wants to get a return on the investment, the Investment Fund Manager is legally and morally bound to pursue the best return for the investor.

Ever since the government of William Pitt invented "Deficit Budgetting" to fund the French Revolutionary War and then the Napoleonic one, we have faced the possibility of government's being unable to repay their loans. It has also given rise to the need for the politicians to pander to the needs of the financial "markets" in order to keep the money flowing into their dreams and ambitions.

There lies the dichotomy. If a politician makes a decision which weakens a currency or impacts on an economy (and they do all the time!) the "market" takes fright and whisks their investors capital out of danger. Thus the Greek €uro crisis, the Irish €uro crisis and all the others are exacerbated by the transfer and trade against the currency by investors. Even the Almighty US$ is under threat from this trade and so is the GB£.

As Der Spiegel points out, the opportunity to remove at least some of the speculative threat was lost when our politicians failed to ban or regulate the most dangerous financial "products" which were responsible for the collapse of Lehman Brothers. They have failed to regulate their own spending as well, borrowing far more than was wise in the pursuit of ideological dreams.

It's a toxic legacy, one which threatens peace and security for us all.

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