Oh Dear - World Economy Woes (Unisa Economics Students are invited to comment)

Now, an economist - I am not. I’m just an ordinary guy trying to make a little sense of it all. Why? because the affects and effects of the economic climate affect us all. Judging by the headlines in yesterday’s and today’s papers it seems that the affects for the next few years/maybe longer will be negative.

Credit Crunch

So, is the current situation a direct result of the ‘08 credit crunch? Is it that the world economy is simply not recovering from the idiotic lending of U.S banks?. I call it idiotic as it is surely idiotic to lend money to people that can clearly not service the debt. This, as I understand it was the basic cause, of the sub-prime crisis. You don’t need to be a banker or a financial expert to know that it is careless (at best) and “criminal” at worst to lend money to people that are more or less broke.

The Hold of Gold.

I invite learned people (especially from the releveant departments at Unisa) to disagree with me (and explain the reasons for their disagreament) but I think the whole problem with the world economy began long before the credit crunch. I think that the cause of the problem started way back - when the major world economies went off the gold standard.

For thousands of years all money was either gold or silver. Then, it was at least backed by gold - meaning that any bank note could be exchanged for its equivalent value in “real”gold. You could argue that gold & paper (bank notes) are ultimatley just things; neither of which in the “grander shceme of things” have any real value. Yet, it seems that gold (maybe because people like shiny things) has a deep rooted psychological significance within the collective psyche. This has been proved (yet again) recently as investors flee to gold causing it to reach a record high.

Having a currency that is not backed by gold allows governments to impliment foolish economic policies. I am aware that this is an over simplification of a complex issue but, just printing money (not backed) by gold is almost the same as the manufacture of toiletpaper. Is this not what caused the astronomical rate of inflation in Germany after WW1?

To follow shortly: (probably later today or tomorrow) a consideration of the impact that the economy is likely to have on Unisa and Unisa students.