Reflection on times passed

Since my blog has been "down" for a couple of days - due to easter and passover, I feel I have to comment on the recent events in the world economy that might affect all of us. Before easter, we saw a G20 meeting in London where rioters attacked a couple of bank offices and one person died. I guess this was very sad mostly because lives where lost and the fact that grown up people shouldnt smash windows that does not belong to them. Anyway, another issue, far more important than these two issues was the fact that no real steps were taken to tackle the the ongoing financial crisis (read more here from Brookings institute). Of course, we heard a lot of talk but no official plans were laid out that stipulated collaborative action against the ongoing lack of liquidity, demand and financial turmoil (even though some 750 bn USD where going to be allocated to the IMF - read the official statement here). I recently read it through, and it has some nice plans and words, not much else.

Some might say "well, they met, a new Nato chief was elected and all was good.. so we are good, right?". Well, no.. not really in my opinion. What we might see is that a few states (such as the US) are taking huge measures to counter the growing resession (I no longer think we are seeing a DEpression). These countries lower their interest rates and increase their quantitative easing (i.e. print more money) and buy bonds. If only a handful of states does this and if not everyone is on the wagon, we might see drainage from these progressive countries, and the effects of increased liquidity is diminished and we remain in a state similar to status quo. It is therefore absolutely vital that the G20 now collaborate and strike together and fast towards the evil of less liquidity. This reasoning is in line with some kind of Keynes theory, who had a thesis that more or less said (this is a great article):
"When times are good, save. When times are bad, spend"
...and this usually works fine - if you are a tightly knit and entirely closed economy with little or no leakages. The last time I took a look at the world economy and the worlds financial markets, it was like an imprenetable global web of nodes, interactions and trades. Could therefore one single actor, like the US government carry the burdon of all our greed and lust for cash? No, we all have to pitch in.

The reasoning is therefore that we all have to spend now, and spend like crazy to scare of the demons called recession, deflation and job scarcity. Hopefully we will see increased efficiency, products that the public actually want to buy and better and more efficient financial markets, where we are not reliant on a few to provide us with so much (I think of big banks). We simply have to lower the systemic risk, i.e. the statement "too big to fail" and face the fact that nothing in the future can be too big to fail and trying to get to that position should be punished, both by regulatory measures and by the stock market. How, in practice, this should happen - i do not know.

Even though its easy to think "lack of liquid markets does not affect me", it does. It is the common man that pays - not high flying CEOs of multinational corporations.