Introduction

Draft Introduction to "The End of Greed"...

When it came to it, I realised that it had taken me an embarrassingly long time to realise what had really happened. I remember the news in 2008 about the mortgage meltdown and how the banking system had suddenly become overwhelmed by "toxic assets". In shock, I failed to join together the dots. The mainstream media told everyone that the whole economy had nearly collapsed, and had only been saved by massive government funded bailouts of the biggest global corporations in Banking and the Automotive industry- which is tightly linked to banking given that most Auto sales are financed by in house loans and the Auto companies make more money on the loans than on selling the vehicles themselves.

Then, 2 years later, I started to study economics, and began to realise that the simplistic story that we had been fed was certainly inadequate, and possibly even false. The idea that sub-prime mortgages had just "gone bad" and the shit hit the fan just didn't add up. Mortgages don't just "go bad", somebody has to stop paying. Sure, they might be more risky, but that wasn't the point, people had clearly been paying them for a while, the mortgage market had been growing smoothly for many years. Yes, it was a bubble. Bubbles burst, and if we are running a primary/elementary school science class it might be satisfactory to say that it just burst. But if we are running a global economy (which I'm not but other people do), then we have to ask why it burst. Why did so many working class Americans suddenly struggle to pay their mortgages?

All bubbles burst, but that's because something makes them pop. What was the pin that the housing market flew into in the year spanning 2007-2008? Why when the market started to collapse could banks not inflate a new bubble, as they had always done in the past to replace the old one? There were many unanswered questions which it seemed that absolutely nobody had addressed. I read many books in finance and economics, but it seemed as though they all gave the same monotonous commentary on what happened, not why it happened? It was as though the economists thought it was adequate to simply say that the banks hit a storm because of the mortgage meltdown, but not explain why the mortgages defaulted in the first place. Excuses such as that the mortgages were somehow exorbitant, even though they had been "exorbitant" for years and the sub-prime debtors had never had too much difficulty paying them. Nothing had changed in the market itself to explain away the crisis of 2008, so I had to start looking in other places.

In late 2010 I looked back at news stories on the internet from the time of crisis, and the years running up to it, and started to realise that the real picture was quite substantially different than the simplified story we had been told. There are no secrets in this book, although there are probably things which many people would rather you didn't know. The first thing that became clear to me was that it was not at all possible that the stock market crash and global recession that came after the mortgage meltdown were because of the mortgage issues alone. A series of other crises were going on at the same time, but the media either lost track of them or wilfully ignored them. The crisis did not result only from the stream of mortgage defaults and in any respect, if the powers that be had been paying attention to issues in the rest of the economy they would have been able to prepare in advance, and likely "smooth out" the crash by pursuing radically different policies long in advance.

In professional reports, an "executive summary", or something of that nature, to summarise the main findings, are always given at the beginning, before the evidence is given. In the case of a book, it would usually spoil things to reveal the plot in advance, but given the controversial nature of some of my evidence, it is necessary to present the findings in advance in order to justify the following chapters. Firstly, I am going to establish the view right now that we are heading right back to where we were in 2008, secondly, this has nothing to do with finance, but finance does help us to visualise the real issues which underpin today's economic predicament, and that the idea of a "financial crisis", or any kind of "debt crisis" is purely an excuse for a deeper crisis that the political elite refuse to admit.

> Current "austerity" measures have nothing to do with excessive debt, but inadequate prospects for the kind of future economic growth necessary to pay that debt.
> Growth is being threatened by a breakdown of the profit structure in our economy, resulting in low levels of investment. In a sense, this is a "crisis of capitalism".
> Cyclical commodity price "mountains" will repeatedly destroy demand in the economy, before soaring again as the economy recovers slightly.
> The most important of these commodities- oil- either cannot be produced at a faster rate (in other words it has "peaked") due to declines in old fields not being offset by new discoveries OR if it has not peaked then it has certainly peaked relative to demand.
> We are entering several years of soaring commodity prices which will lead to political unrest around the world, first in the poorest countries. NOTE: after I wrote this introduction, revolutions sparked off all across the Arab world.
> Commodity prices will eat so severely into business profits that many of the worlds biggest firms will become bankrupt, leading to a complete breakdown in the supply chains that globalization depends on.
> That in 2008 these trends occurred, with businesses posting profit warnings and in some cases declaring bankruptcy. At the same time, commodities were soaring.
> That in 2011/2012 this is repeating itself and each "repeat" will herald a more brutal crash because there will be less financial capacity to fund bailouts. Bailouts themselves are financed either directly or indirectly by borrowed money, and as inflation worsens due to the widening gap between demand and supply for crucial commodities, central banks will be forced to increase interest rates.
> That in several countries in Europe, and the US itself, the governments and central banks have run out of financial capacity to prevent another crisis at the end of this year or sometime next year.